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InContext / An inside look at the business of digital content

Industry experts offer 3 ways streaming services can reduce churn

October 6, 2022 | By Matthew Keys – Independent Media Reporter @matthewkeyslive

The Wall Street Journal recently profiled a couple that they characterized as  frustrating customers for streaming services. They subscribe to a streaming service, binge what they want to watch, then drop that service and move on to something else. Unfortunately, they are emblematic of a growing segment of streaming audiences.

When Netflix was king of the streaming services, this practice was rare. This was, in part because Netflix had a little bit of everything: hit shows like “The Office” and “Friends,” interspersed with licensed movies from blockbuster studios and must-watch original programs like “House of Cards” and “Orange is the New Black.” Didn’t have Showtime but wanted to watch “Dexter?” Netflix had it. Want to watch “Breaking Bad” without cable? Netflix had that, too.

But over the last few years—as others seek to reap the attraction of their own IP—Netflix has lost some of those key titles that once made the streaming service a must-have for households. NBC moved “The Office” to its own service, Peacock. Warner Bros. did the same thing with “Friends,” bringing it to HBO Max. “Dexter” is now exclusive to Showtime, which can be had as an add-on within Paramount Plus. “Breaking Bad” is still on Netflix, but only for the next few years, at which point it will presumably be exclusive to upstart streaming service AMC Plus.

Unfortunately, the diffusion of content to various services has created a nightmare scenario for streamers. Now, couples like the one profiled by the Journal are becoming the norm.

According to the analytics firm Antenna, around 19% of customers who subscribed to premium, cornerstone streaming services like Netflix, Amazon Prime, Disney Plus, and Hulu dropped three or more of their subscriptions between June 2020 and June 2022. That’s an increase of 6% compared to the period between June 2018 and June 2022.

Their loss has been a benefit to newer streaming services like Paramount Plus, Apple TV Plus, Discovery Plus, and others. However, the nature of how the streaming video business works means their models are not ironclad. Most services offer monthly subscriptions, and with no contract or other long-term mechanism to lock them in, customers can drop those start-up services just as easily as churn through the premium ones.

There are some obvious ways a streaming service can keep customers engaged in a way that reduces churn: Offer compelling shows and movies. Keep the price affordable. Make it easy to use. Make it available on every platform and every device. But with a dizzying landscape of streaming services that are spinning up at a breakneck pace, low prices and hit programming aren’t enough of a strategy to keep viewers locked into a service over the long term.

So, we asked some experts in the video space for other ways streaming services can grow their audience while keeping churn levels relatively low. Here is what they suggest:

1. Know your audience, and respond with that content

When the Fox Nation streaming service launched four years ago, the brand was franchised from Fox Nation section of the Fox News website, which offered a mixture of political and social commentary from thought leaders and digital correspondents. In some ways, it was a “Fox News Plus,” in that it carried several streaming political commentary shows and documentaries that were largely hosted by Fox News personalities.

That worked to a point. But as time went on, executives at Fox News Media realized the Fox Nation streaming service could serve as a platform for other types of content. It offered a home for historical documentaries, general entertainment programs, reality-based shows—content that Fox News enthusiasts had to find across a number of other services, if they were offered at all.

So Fox Nation has stepped up to fill the void. The service commissioned original shows and documentaries that it figured would appeal to the average Fox News viewer. And it has made them easy to find in a single service at a low price point.

“We definitely know what the space looks like for Fox Nation: it looks a lot like what the Fox News audience watches when they’re not watching Fox News,” Jason Klarman, president of Fox Nation, said in an interview. “Curation is at the heart of this. It’s about serving an audience that wants us to give them the content that they otherwise might go somewhere else—everything from real estate shows to cooking shows.”

The opinion programming is still there. In fact, Fox Nation viewers get next-day access to prime-time shows like “Tucker Carlson Tonight” and “The Ingraham Angle” as part of their subscription. But they also get shows like “Sharon Osbourne: To Hell and Back,” a documentary that dives into the issues of cancel culture; “The Pursuit with John Rich,” an interview show with the country music star; and “Historical Battles for America,” a docuseries hosted by Kelsey Grammer.

While the Fox News audience might be considered niche, Klarman said focusing on what those viewers would want to see from a general entertainment streaming service has done very well for Fox Nation. In fact, he went so far as to say Fox Nation has one of the lowest churn rates in the industry (second only to Netflix, he says) because the streaming service’s programming is able to make an emotional connection with the core Fox News audience.

“The opportunity is as big as we want it to be,” he said.

2. Partner with a streaming platform

While some companies like Fox, Showtime and Discovery are able to leverage their traditional cable brands to lure viewers into a streaming service, other upstarts like Acorn TV, Britbox, and Shudder have ventured into the streaming landscape with virtually no name recognition. And all still have the challenge of keeping customers once they’ve signed up.

None of this was a problem for media companies in the era before streaming: If a customer wanted premium television, they signed up for cable or satellite. When they did, they could reasonably expect to have access to the channels carrying the shows that were discussed around the water cooler at work the next day. And accessing a new show was as simple as changing the channel.

Today, things are different. Content is spread out across a few services, which makes for a confusing landscape with many gatekeepers. That is a problem that the big four streaming platforms—Roku, Amazon Fire TV, Apple TV, and Android TV (Google TV)—have sought to address with various algorithms that help viewers discover content across services.

Roku takes things a step farther with its Roku Channel, an app that comes preloaded on every Roku device sold. Through the Roku Channel, users can sign up for dozens of third-party streaming services like Showtime, Starz, Discovery Plus, Paramount Plus, Epix, Acorn TV, and others. The services are paid for using Roku Pay, and content is streamed within the Roku Channel app. The approach makes purchasing a new service and streaming shows and movies a frictionless experience for customers.

“The Roku Channel allows us to showcase content and make it easy to discover and find and potentially attract audiences that would never have discovered it,” Nicole Fencel, a Roku executive in charge of premium streaming services, said at the NAPTE Streaming Plus conference last month. “Otherwise, it’s very hard for smaller services to play in an ecosystem that’s consumed by these major services…finding ways to bring that content up and elevate it across the platform is a way that we can help.”

The Roku Channel is not alone in offering this type of feature. The Apple TV app and Amazon’s Prime Video Channels also offer a marketplace for buying third-party streaming subscriptions, with content delivered within those apps. Google is reportedly working on a similar marketplace that will be powered by its YouTube streaming service.

None of those tech companies require streaming services to offer subscriptions through their marketplaces in order to reach customers on their platforms: Showtime, Epix, Paramount Plus, and others are still available as individual downloads, and customers can sign up directly for those services through the websites of each company.

But Fencel said there’s a benefit to partnering with the Roku Channel: Users have an easier time watching movies and TV shows across different services when they do so through that app, and Roku has developed numerous technologies centered around learning what its users like to watch, then surfacing movies and TV shows they may want to watch next.

“Finding ways to bring that content up and elevated across the platform is a way that we can help,” Fencel said, noting that helping users discover new content can lower overall churn rates.

3. If a customer is going to leave, make sure they leave happy

But Roku’s technology, and that of its competitor platforms, can only take a streaming service so far, something that Fencel acknowledged during her interview at NAPTE last month.

“We will make sure we help prevent churn as much as possible, but if a customer is going to make the decision (to leave), they’re going to make the decision,” Fencel said. “So, our job is to try to figure out, how do we re-attract them?”

Some might assume that the answer is simple: Add more programming that people want to watch. Or lower the price of a service to attract more customers. But some streaming services don’t have the benefit of adding programming or changing prices on a whim.

Philo is one such streaming service: It offers more than six dozen live pay television networks, the same found on cable and satellite, for $25 a month. Philo is able to keep the price low by making deals with programming partners that don’t offer cable news or sports channels. And, luckily, Philo carries a handful of channels that are responsible for many cable hits, including AMC (“Breaking Bad,” “The Walking Dead”) and Paramount Network (“Yellowstone”).

However, Philo is still very much at the whim of its programming partners. It can’t control the shows and movies that the live channels choose to carry in a given season. And it knows that customers might sign up to watch a season of a show like “Yellowstone”, and then leave for a different service once that show has run its course for the year.

Thus, Philo’s executives spend a lot of time thinking about the thing they can control: The customer experience. Does the app work? Is there enough variety? Can customers tune in and relax, or do they have to spend a lot of time finding something to watch?

That strategy has worked well for Philo. The service has grown to over 850,000 paying subscribers as of last year. (The company is private and doesn’t regularly reveal how many subscribers it has). Still, like other streaming services, it allows customers to start and stop service on a whim, which it considers to be its advantage over cable and satellite. However, its a situation that keeps the door revolving.

“I think everyone kind of accepts that churn is a reality,” Andrew McCollum, Philo’s chief executive, said in an interview. “But we have a particular belief that it’s really important people have a good experience with Philo, and that even if they leave, they leave happy.”

Philo’s philosophy is that a satisfied customer who ends their subscription will likely return when their favorite show starts up again, or when they discover a new program that is on a channel carried by the service. It is the kind of brand loyalty strategy that starts and ends with the overall customer experience.

“In a world with high churn, if people have a good experience with Philo, and they leave, and they leave happy, the next time they want to watch something we carry, hopefully they’ll come back to us,” McCollum said.

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