Swrve was delighted to attend this year’s Future of Video: OTT, Pay TV and Digital Media event, hosted by Parks Associates in Marina del Rey, California. Key experts and decision makers from Netflix, Crown Media, Google, Discovery, and other major industry players were present at the three-day conference. They traded strategies and business cards, while many aired their concerns over challenges the industry is currently facing. Swrve CSO Barry Nolan was a featured speaker on the Video Service Acquisition and Retention Strategies Panel, delivering actionable insights that were met with great interest and energy from attendees.
If you weren’t there, not to worry. Here’s an overview of what was covered, what really stood out, and where we should all go from here:
The Shift in TV Habits
It will surprise no-one especially, but it’s always worth reminding ourselves of just how quickly industries can change entirely. Since 2010, there has been a steady, inexorable shift in TV viewing habits, from the broadcast (linear) TV that we all grew up with, to online video consumption. In the US, 2010 saw 25% of viewing per week taking place online, increasing over the last 8 years to eclipse the 50% mark. This number is only going one way too, with estimates of almost 75% penetration by online video in the next 5 years.
Consumption by Platform
There has also been a shift in how video is consumed. Alternative platforms to TV sets - mobile, tablets, computers - create genuine multi-channel viewing possibilities for consumers. And while 70% of viewing takes place through a TV, the importance of mobile and PC is growing, and should not be underestimated, as viewers tend to move between channels all the time. This is particularly important as purchase journeys are fluid across platforms. In fact purchase journeys primarily start on PC (40%) and mobile (35%). It’s therefore vital to track and message across all platforms in order to maximize your reach.
Consumer Adoption and Increasing Demand
And likewise, consumers are adopting more OTT services with each passing year. Household penetration in the US is now at 70% for households with a broadband connection. Perhaps even more telling is that 61% of OTT consumers subscribe to at least two services, showing that there is an appetite for content, and a willingness to purchase.
OTT Leaders’ Market Share & Changes
But despite this, the market is dominated by the three giants of OTT providers - Netflix, Amazon Prime Video, and Hulu. So much so that 91% of OTT subscribers in the US have at least one of them. This doesn’t leave much for the other, approximately, 240 providers, who outside of a further 10 of reasonable scale, are small and specialized. In fact most of the growth is with the Big 3, who all substantially increased their subscriber base in 2018 - Netflix added 6 million subscribers; Amazon Prime Video users grew by 10 million; and Hulu increased by 8 million. The next 10 players saw modest growth, far below that of the Big 3.
OTT Business Models
The primary model, which OTT services live or die by, is subscriptions. Around 70% of services monetize this way. Advertising, freemium, and transactional, are considerably behind as models in the market. This is because auto-renewable subscriptions are the key to profitability. Getting your strategy right is going to bring your business success. The number one way to drive subscriptions is a free-trial, and you should focus your efforts into activating, and converting, as many consumers as possible through relevant messaging. Check out our Blueprint on how to drive OTT subscriptions to see how we do it.
Why People Subscribe
Content is king, and it’s the number one reason why people subscribe to a particular service (or, as the case may be, don’t subscribe). As acquisition content is so powerful, it’s worth using this to its full advantage. Logically OTT providers advertise heavily using these desirable shows as bait in social media news-feeds, particularly Facebook. It’s the number one channel for driving app installs. It therefore makes sense to serve customized onboarding to new users, the first time they open your app, corresponding to the offer or particular show that tempted them to commit to the download. Swrve and Facebook partnered to enable this unification of the ad-to-app journey, with the result being improved conversions of up to 11x.
Churn Is the Big Issue
Churn kills businesses, and the bad news for many OTT providers is that it is obscenely high in this industry. Only Netflix and Amazon have churn under control, with both under 10%. Hulu have done great work recently to nearly half their churn to 21%. On the other end of the scale, some providers have churn rates as high as 95%, which frankly brings tears to our eyes. The truth is, just a 1% reduction in churn equals a 5% increase in LTV. And even better, it’s really not that hard to get a handle on where you’re going wrong, if you instrument your app correctly, and deliver personalized and relevant messages to customers who are at risk of churning. Take a look at our LTV Blueprint to find out more.
Why People Churn (and How Swrve Helps To Solve It)
So why do people churn? In most cases, it’s not what you’d think:
Price: Many providers think it is due to price. Swrve thinks otherwise. Price is actually closely related to perceived value. Or in other words, if a consumer is not using your service, they aren’t getting value from it, and they churn. So the problem is actually to do with engagement. Demonstrate to consumers the value of your service, and they’ll use it. If they’re using it, the chances of them churning are minimized. Believe it or not, there are very simple techniques to increase engagement that you may not have implemented - check out our webinar about it.
Lack of Content: There’s 48 years worth of content on Netflix. Put simply, there isn’t a lack of content. The problem is more likely a recommendation challenge, so that people can find content that is tailored for them easier. Knowing each and every customer based on their cross-channel historical behavior, and communicating with them in perceived segments-of-one, will help solve this relevancy problem, and as a result, reduce churn.
Poor UX: The key is to understand which UX features drive retention, and then make sure that all customers are made aware not only of their existence, but also of their value. For example Spotify’s ‘discover weekly’ playlist is a great feature that can be hard to initially find. An in-app message at a strategic time, explaining that it will curate music each week for you based on your taste, will go a long way to improving feature adoption. Keep track of feature usage with comprehensive analytics, and A/B test UX variants to see which gets consumers engaging the most.
Episodic and Seasonal Churn: Sports seasons come to an end, and popular TV shows eventually do to. This is no excuse to allow your customers to churn! Concentrate on engaging customers during these fallow periods, recommending them new content that may pique their interest and stop them from clicking that cancellation button. Or win back customers with special offers until the season starts again. There really are so many tactics you can employ. Don’t let them churn - you’re better than that!
To speak to someone from Swrve about how our multi-channel marketing platform can help you reduce churn and increase subscriptions, please contact us here.