OTT Churn and Retention: Increasing Lifetime Subscriber Value · OTT service OTT subscription only Concurrence of Pay-TV and OTT Service Subscriptions (2014-2017) AmongU.S. BB HHs

OTT Churn and Retention: Increasing Lifetime Subscriber Value

September 611:00 AM CT

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Speakers

Hunter SappingtonResearch AnalystParks Associates

David BrowneSr. Director of Product ManagementComcast Technology Solutions

Barry NolanCMOSwrve

Introductions Parks Associates Research The State of Churn in Today’s OTT Video Market Strategies to Increase Subscriber Retention

Swrve: Increasing Lifetime Subscriber ValueComcast: Churn - Understanding Consumer MotivationsInteractive Expert Panel DiscussionAudience Q & AClosing

Agenda

OTT Churn and Retention:The State of Churn in Today’s OTT Video Market

OTT Penetration is Starting to Plateau

0%10%20%30%40%50%60%70%80%90%

Q1/2013(N=10,000, ±0.98%)

Q1/2014(N=10,000, ±0.98%)

Q2/2015(n=5,029, ±1.38%)

Q3/2016(n=9,967, ±0.98%)

Q1/2017(n=5,158, ±1.36%)

Q1/2018(n=5,011, ±1.38%)

Overall OTT Service Subscription Penetration (2013 - 2018)Among U.S. BB HHs Surveyed

"DM6005. To which of the following video services does your household subscribe (do not include services that you are using on a trial basis)?"Source: Multiple Surveys: American Broadband Households and Their Technologies | © 2018 Parks Associates

“Service Stacking” is the Norm

Q1/2014 (N=10,000, ±0.98%)

Q2/2015 (n=5,029, ±1.38%)

Q3/2016 (n=4,973, ±1.39%)

Q3/2017(n=5,009,±1.38%)

4 or moreservices3 services

2 services

1 service

Number of OTT Service Subscriptions (2014 - 2017)Among U.S. BB HHs Surveyed

r of O

Massive Competition in Online Services

68 85 109156

192 21418

4330 5

1 1 8 7 8 4

2013 2014 2015 2016 2017 2018

Closed New Existing

United States OTT Video Services, 2013-2018Parks Associates OTT Video Market Tracker

Churn has Remained Stable Overall

Q2/2015 Q3/2016 Q1/2017 Q1/2018

OTT Churn and Cancellation Rates (2015 - 2018)Among OTT Subscribers or U.S. BB HHs

"Q6020/6026/DM6030. Which of the following services did you previously subscribe to but you cancelled the service over the past 12 months?" | Source: Multiple Surveys: American Broadband Households and Their Technologies | © 2018 Parks Associates

Cancellation Rate

Churn is High for Most OTT Services

0% 20% 40% 60% 80% 100%

NetflixAmazon Prime Video

HuluOther subscription, online video service

Sports OTT video servicesCBS All Access

STARZYouTube TV

YouTube RedDIRECTV Now

Hulu with Live TVSling TV

HBO NOWPlayStation Vue

Showtime

Subscribers Canceling OTT Service as % of Current Subscriber Base (Q1/18)Among Current Subscribers of Specified OTT Services

"DM6030. Which of the following services did your household cancel over the last 12 months?" | Asked of a Subgroup of 5,011 U.S. BB HHsSource: American Broadband Households and Their Technologies Q1 2018 | N = 10,015, ±0.98% | © 2018 Parks Associates

% of Subscribers Canceling OTT Service as % of Current Subscriber Base

* Small sample size

Primary vs. Complementary Services

Q1/2014(N=10,000,

±0.98%)

Q2/2015 (n=5,029,±1.38%)

Q3/2016 (n=9,967,±0.98%)

Q1/2017(n=5,158,±1.36%)

Neither service

Pay-TV servicesubscriptiononly

Subscribers toboth pay-TV &OTT service

OTTsubscriptiononly

Concurrence of Pay-TV and OTT Service Subscriptions (2014-2017)

Among U.S. BB HHs Surveyed

"DT1035. Which of the following best describes your home’s TV service? DM6005, To which of the following video services does your household subscribe ?" Source: Multiple Surveys: American Broadband Households and Their Technologies | © 2017 Parks Associates

Primary Services

Complementary Services

• Price Increases• Competitive Offerings• Negative Experiences• Lack of New Content• Changes to a Service

Triggers for Churn

Quality and Content are Key

0% 5% 10% 15% 20% 25% 30% 35%

Other reason

I am dissatisfied with the interface

The quality of video streaming is poor

The content is not current

I watched all of the interesting content that was available

Another service is more interesting to me

I plan to only subscribe for a short time

The library is too small

The season for this sport is over

The subscription is not worth what I am paying

I plan to cancel in order to save money

Reasons for Planning to Cancel an OTT Service (Q4/15)Among U.S. Respondents Planning to Cancel an OTT Service, n = 706, ±3.69%

"DM6040. Which of the following describe the reason that you plan to cancel [Service to be Cancelled]?"| Source: American Broadband Households and Their Technologies Q4 2015 | N=10,000, ±0.98% | © 2016 Parks Associates

% Citing Factor as Reason for Planning to Cancel

Price/Value

Competitive Offering

Content

User Experience/Changes

Content

Strategies to Increase Retention

• Community Building

• Community Building• Retention Incentives

• Community Building• Retention Incentives• Data-Driven Insights

• Community Building• Retention Incentives• Data-Driven Insights• Content Additions

• Community Building• Retention Incentives• Data-Driven Insights• Content Additions• UX Enhancements

Swrve: Increasing Lifetime Subscriber Value

Barry NolanCMOSwrve

Know and personally interact with OTT usersacross TVs, Boxes, Web, Tablets, Smartphones

The Churn Equation

1% reduction in churn

5% increase in user Life Time Value

Among U.S. Respondents Planning to Cancel an OTT Servicen = 706 ± 3.69%

Price/Value

Content

Reasons for Planning to Cancel an OTT Service Q4/ 15

Price1

The subscription is not worth what I am paying

Case Study: Churn is killing us. Reduce the price.

Monthly Subscription magazine> 30% annual churn of subscribersCustomer Acquisition Cost (CAC) > Life Time Value (LTV)

Solution: Reduce the price

Price decrease had zero impact on churn

So they reduced the price again.

This price decrease had no impact on churn either.

Using Swrve they triggered an in-app survey the instant someone unsubscribes.

Only 3% said it was price

Triggered in-app message

It was a storage bug. One code fix, fixed $2.5m in churn.

Price ≠ costPrice = perceived value

If users are not using your product, they are not getting value from it

Increase engagement > Increase Retention

Price/Value

Content

Price1

Content2

OTT engagement strategies

The Reach Gap - OTT/Media Streaming ConsumersViewers move between channels all the time, but TVs dominate

40%Signup by PCs

35%Signup by Mobile Apps

25%Signup by TVs

15%Viewing on a PC

15%Viewing on Mobile 70%

Viewing on TVs

Source: Netflix, Mar 7, 2018

PC Mobile Smart TVs

Even basic comms plan will increase engagement

Netflix push notification

Spotify in-app message

Netflix email

A/B test: comms impact on engagement

Often overlooked - most users don’t really care for what you say.

1% CTR

Micro-segmentation unlocks engagement

Segment-of-one

Purchased 4 Conor McGregor

PPV fights in the last 3 years,

and has just watched UFC229

McGregor trailer twice in the

last week.

Traditional Segments

Purchased PPV

engagement

Up-sell campaign

Message-of-one - across all platforms

Nurture & Grow

Behavioral Segmentation

Nurture habits with new usersNew user, watched just one show, two days ago

+200% MAU

+20.5% in viewing time

+9.4% movies streamed

+5.5% videos downloaded

+15.4% favourites saved

`Re-engage & Retain

AI delivers new insightsWho is likely to churn?

Who is slipping away?Way easier to retain before they’ve unsubscribed

AI is best a predicting behaviors

Price/Value

Content

Price1

Content2

I’m dissatisfied with the interface

Progress is the sum of all testsThree key Spotify tests that drove retention

Family Plan Discovery Playlists

Spotify churn = 5.5%.

+18% shows

watched

Test every element of your UX across platformsWhich UX increases engagement most?

Pricing paywall testWhat happens when we reduce the number of free articles per month from eight to four.

+27% conversion

ARPU Daily (Test = 8)ARPU Daily (Control = 8)

0.0493

0.0618

Churn - Understanding Consumer Motivations

Barry NolanChief Marketing OfficerSwrve

Generally speaking, are services using consumer viewing data enough to prevent churn?

How should OTT providers be investing in subscriber retention compared to acquisition?

What are the key touchpoints in which OTT services are not adequately connecting with their consumers?

How do you see trends in bundling and aggregation of OTT services affecting churn going forward?

What can OTT services do to encourage consumers to subscribe for longer than a single month at a time?

Audience Q&A

Future of Video: OTT, Pay TV, and Digital Media

#FutureVideo18 @video_future

Hunter SappingtonResearch Analyst

972.490.1113hunter.sappington@parksassociates.com

WWW.PARKSASSOCIATES.COM

Thank You

OTT Churn and Retention: Increasing Lifetime Subscriber Value · OTT service OTT subscription only Concurrence of Pay-TV and OTT Service Subscriptions (2014-2017) AmongU.S. BB HHs

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