Leading Strategy And Consulting Firm Experts Break Down Churn Trends, Why Enemies Will Become Frenemies, and How SVODs Will Need to Respond as Free Ad-Supported Services Gain Ground
New York – December 11, 2023 –During a virtual presentation held today, Magid, a leading strategy and consulting firm supporting the media industry for the past six decades, presented their 2024 predictions for the entertainment landscape. The forecast was based on findings from several of their revolutionary, proprietary analytic tools including SubScape™ which provides media companies with nuanced, actionable insights about what drives or inhibits consumer engagement in streaming services – or the “why” of churn.
As part of their assessment on current streaming dynamics, Magid declared that churn is the “cholesterol of streaming” meaning that not all churn should be painted with the same broad brush. There is good churn and, conversely, bad churn, and according to Magid, streamers must determine which is which in order to win the knife fight that has become the streaming wars. Based on recently announced SubScape™ findings, anchored by consumer-centric learnings, churn isn’t solely based on dissatisfaction with a service. There are a variety of factors which include the predisposition of some subscribers – who are habitually inclined to churn- and others who will only unsubscribe if they experience a material service weakness.
The winner of the battle for consumers will be those who understand how to master churn. Churn is, with the proper filter in place, predictable and can also be a driver of growth. Subscribers’ inherent churn attitudes, behaviors and motivations vary, and can be understood through the framework of Magid’s six distinctive, psychographic segments – including the segment Magid identifies as Hypers™ that account for almost a third of new subscribers on average in any given month.
Magid also says that more audience volatility doesn’t necessarily equate to a loss of subscribers and not all churners are of equal value. Sometimes volatility can and should be part of a streamer’s winning strategy. For example, Hypers™ who have the highest proclivity to churn, are also hitmakers, social amplifiers and organic marketers that carry more services (six) than the average home (3.3), lifting ARPU for those who embrace them.
So what does all of this mean for 2024? With the effects of the Hollywood strikes still manifesting and Wall Street hyper-focused on profits and performance, Magid sees five trends on the horizon as we ring in the year:
#1 – CHURN GOES UP, NOT DOWN:
- That’s right! It’s not over yet. Magid’s findings indicate an industry transition from a high momentum Market to a low growth and in some cases no growth market – hence, movement between services (adding in some cases, substituting in others) represents more of a growth opportunity than the number of net new subscribers entering the ecosystem. Churn will also increase as streamers see an imminent hit to their library catalogs and they execute on a service strategy which includes aggressive price increases; AVOD becoming a viable option to SVOD; and consumers maxing out on monthly costs and/or feeling less daunted by the process of “unsubscribing.” As a result, players large and small will experience turbulent churn seas ahead unless they develop strategies to manage churn with precision.
#2 – FREE STREAMING, WHICH IS ASCENDING, FORCES SVOD INTO A PREMIUM CORNER
- As free services encroach on paid video territory, SVODs will concentrate their investments on what AVOD doesn’t do as well — forcing a shift in strategy. Because AVOD excels in news, kids, family and reality content, SVODs will have to do a better job delivering and marketing their higher cost / premium content to earn subscription fees from consumers.
- Outside of the top six paid services, Magid’s primacy list is heavily populated by free services like Tubi, Pluto and The Roku Channel – why? Because there are multiple attributes of free services that make them as appealing to consumers as those they pay for.
- The result will be SVODs that look and feel more akin to the HBO of old, turning to, for example, expensive dramas and movies off net in their first run outside of theatrical and sports rights, as a way of differentiating their service when it comes to quality content. Based on Magid findings, an SVOD challenge in 2024 is whether streamers can be effective in that endeavor given the maturation of free video and that SVODs are being forced to spend less on production while delivering differentiating content.
#3 – WHAT IS OLD BECOMES NEW AGAIN (BUT IN A NEW WAY)
- Consumers will be recreating the bundle that they had via cable 15 years ago but with a different assortment of assets, tied together synergistically through creative partnerships. We will see bigger, value-added, stickier bundles that justify a consumer shifting away from a monthly commitment towards an annual one with greater consequences for cancellation. Also, partnerships will be more effective and efficient if anchored around a channel based option (a la a virtual MVPD) that facilitates more bundling (and vertical broadband integration).
#4 – ENEMIES BECOME FRENEMIES:
- Those who have been competitive in the past will have to put their emotions aside and play nice in the sandbox by partnering strategically. Ultimately, services will have to marry each other in order to stabilize their businesses and establish a sustainable business model. With one single subscription, one access point and an annual bundle option, SVODs will improve discovery, reduce volatility and increase licensing value. And, contrary to conventional thinking, bundles that feature an anchor broadcast partner will create greater overall value including total amortization strategy for new dramas and sitcoms, etc.
#5 – PRECISION MARKETING WILL RULE:
- In 2024, there will be a move towards precision marketing as messaging to the right audience about the right shows will be key to streaming success. Marketers’ decisions around spend, especially when it comes to hidden gems, will take on new importance as streamers attempt to identify who’s watching and why and work to attract brand advocates who will tout the value of their service. Bigger players will have a clear advantage when it comes to budget so smaller players looking for ROI will need to offer up more nuanced, targeted shows and campaigns to drive consumers to go to their respective platforms for a specific piece of content.
SubScape Methodology: Monthly tracker of subscriber attitudes and intentions, paid and free streaming services’ flow of consumers, usage, product attributes and overall vitality. 2,000 Persons 13-75 surveyed monthly, weighted to U.S. census proportions by age, gender, income, race and ethnicity. Survey fielded in English. Delivered to clients via API, interactive dashboard, and through consulting engagement.
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Magid is a strategy and consulting firm that helps companies make better decisions and put them into practice. For more than six decades, our courageous thinking has helped hundreds of brands worldwide become an essential part of peoples’ lives – making and sustaining category leaders. With a human-centered approach grounded in psychological and social principles, we leverage years of experience, perspective and foresight to help clients win.
FerenComm for Magid / email@example.com