Here Comes The Holiday Cheer – And Churn?

By Mike Bloxham, EVP, Global Media, Entertainment and Games / Co-Lead of Subscriber Science at Magid

The Holiday season is undeniably upon us. Most of us will be eating more, drinking more and partying more than we do during the rest of the year. And by the end of it at least half of us will be experiencing some kind of regret and wondering why we binged so much and how we lose the weight.

As well as bingeing on food and drink, we also tend to binge on an array of TV content – whether new blockbuster movies and series, seasonal favorites, sports or whatever we can find to help snooze off the huge meal we’ve just devoured.

We’re more likely to explore different streaming services in search of content – maybe even subscribe to a new one and drop a couple we haven’t used lately. Add to that the number of new TVs – with pre-loaded apps – entering homes, new Fire Sticks, Apple TVs, Roku devices and the rest and you have a recipe for a heightened level of what you might call Holiday Churn.

Which doesn’t sound good. But bear in mind that when people drop one service, they are very often looking to sign up for another. So when churn is about movement between services, it’s as much about growth as it is about contraction. The question is – come the New Year, which services will have gained more subscribers than they lost?

So with that in mind, here are a few things every retention team at any streamer should keep in mind to come out of the right side of the churn equation this season.

1. Churn is the Cholesterol of Streaming: (This is the big thing) We used to think that all cholesterol was bad and that you wanted as little of it as possible. But now we know that there is such a thing as “good” cholesterol and it’s all about having a healthy balance. Churn is the same. Sure, when someone stops paying at the end of the month, it’s not a good thing. But not all churn is about dissatisfaction with the service. Some of it is in fact directly correlated to growth. There’s a subset of the population that are high value and highly engaged customers who also happen to be your hit-makers. They tell more people about more shows than other customers. They drive people to your service. But they also churn more than other customers. They’ll return when they know there’s something they want to see – and they’re more likely to pay full price. Accept the fact these hit-makers are more likely to churn and work on getting them to spend an extra month of two on the platform by treating them differently. Study them and market to them based on their likes and their behaviors. At 12% of the population, they account for around 30% of new subscriptions every month so they are disproportionately important. Don’t treat them like everyone else.
2. Not All Subscribers Are Created Equal: Focusing simply on subscriber headcount is a poor measure of both business performance and growth. Different subscribers have different propensities to churn or remain. We all know this. Some people sign up and will never leave. Others are habitually switching services on and off. Naturally, those two groups represent different revenue possibilities. So, to understand how to optimize revenue and growth we need to know how many of our subscribers are likely to stay for the year and how many will only be around for few months. Propensity to churn impacts the financial outcome, business stability and growth. Too many high churn subscribers and growth will be harder to sustain. Every service needs to achieve the right subscriber mix based on key goals and resources available. It’s not the same for all services.
3. Work On Your Indispensability: In the same way that subscribers are differently inclined to churn, services themselves are obviously not equally churnable. But nor is any service wholly indispensable. Unsurprisingly, Netflix is the most indispensable service with 19% of high churn subscribers and 26% of low churn subscribers defining it as such. But the next highest ranked service scores less than half those numbers. So, understanding how subscribers with high-churn behaviors and low-churn behaviors rate the services they use, how many of each you have and what content they are hungry for is what enables effective message targeting to improve retention and achieve a sustainable balance of high- and low-churn subscribers.
4. Leverage The Library: Big blockbuster streaming originals are essential to create buzz and attract subscribers. But when people come for a specific show, a good number of them will be planning to drop the service when they’ve seen what they wanted. Unless you give them a reason to stay. And that’s where good library content comes in. Specifically, series with lots of seasons that maybe originally aired on cable nets. We have research across thousands of titles that consistently shows that the programs people will keep subscribers on a service happen to be those dramas and comedies that ran for six, eight, ten series. Not surprising as people like to binge on a show with loads of seasons and episodes to indulge in. Which makes them some of the most valuable shows in the landscape. Suits has proven this out recently. So use your originals as marketing platforms for your best long-running series and increase your chances of keeping more customers that might otherwise be “one-and-done”.
5. It’s Not About Headcount: Finally, something about how we define and measure success. For the longest time it was all about subscriber numbers. But simply assessing a business on the basis of headcount is obviously an imperfect approach. As referenced above, some subscribers represent stability (long-term subscriptions) while others represent volatility through their propensity to unsubscribe and resubscribe. So, the number of subscribers is a poor predictor of revenue. It doesn’t account for volatility nor for resubscribes and total subscriber tenure. With that in mind, we’re advocating that we instead focus on reporting Total Subscribed Months (TSM) per quarter, per year etc. That way it is easier for expectations of the market and any service to be based on business results rather than the blunt instrument of subscriber headcount. After all, two services with identical subscriber numbers may yield very different Total Subscribed Months in the same period, based on the make-up of their subscriber base and their content library among other things. So by focusing on Total Subscribed Months (TSM), we can better manage our success and – if we really understand what engages and satisfies our audience cohorts – we stand a chance of achieving more with smaller budgets. Which – besides being a bit of an industry mantra right now – is pretty much what every streamer would like for the Holidays.

Mike Bloxham is EVP, Global Media, Entertainment and Games / Co-Lead of Subscriber Science at Magid. Data cited is taken from Magid’s SubScape – ongoing measurement and modeling of service- and market-level metrics that define success in subscription-based and ad-supported streaming.