Streaming services have become a greater part of our entertainment diet, with 78% of consumers in the United States using a subscription video-on-demand service (SVOD) in 2021, according to Leichtman Research Group.
So getting and keeping subscribers has become a spending war. That means whoever among the warring parties keeps a hold of the most subscribers wins. But now customer churn, which is when a person stops using a service, has become a way of life for viewers and a moment of reckoning for media and entertainment companies—and it’s just getting worse.
37% of users canceled a streaming subscription in the last six months
Average monthly churn for streaming video services reached 5.2% by the end of 2021
Churn is up from 3.2% at the start of 2019
The bellwether of video streaming services, Netflix, recently announced a big decline in subscribers.
In fact, even as Netflix anticipates fewer subscriptions, streaming services are projected to rise to 1.3 billion by 2024, driven by fresh content offerings from providers such as Paramount+, Discovery+, and Disney+. The research found that 58% of customers buy multiple streaming services, and this trend shows no signs of slowing down. In the U.S., the average number of services per household is four and the average churn rate has remained at about 37% across all paid SVOD services in recent years.
This is a big deal because content is king only insofar as it can carry subscribers along a path that does not simply lead them to what they want, but does so in a manner they enjoy enough to keep them there. There has to be a seamless experience from acquisition to recommendations to content consumption to renewals and ads.
In the context of today’s streaming ecosystem, we must examine methods of turning churn into retention. We will look at the role of user experience (content organization, search, and other ways of squaring desire with navigation), communication, and the role of data.
Then we’ll take a look at the possible future of streaming.
The current subscriber ecosystem
The continued expansion of streaming content we spoke of above is not one sided. It is compounded by both expanding consumer and business interests.
“You currently have a lot of different streaming consumers who are looking for entertainment, they are looking for news, they’re looking for sports, they’re looking for documentaries and nonfiction,” said Bill Stratton, Snowflake Global Lead for Media, Entertainment and Advertising. “They want to be entertained, they want to laugh, they want to be informed, so we’ve seen the streaming industry really grow up around that. You saw Netflix really diving into entertainment initially, but also growing some of that documentary space. You’ve seen Amazon start with entertainment, but then add in things like live NFL games to Amazon Prime.”
This explosion of programming is driven by a need to grow and compete, for companies to overcome the limitations of their initial offerings. It is also driven by an increased awareness that subscribers are jumping to competitors to take advantage of promotions, and as their interests change and evolve. Another challenge is the growing number of options to bundle services together, which can often prevent subscriber churn. This can be problematic, as Stratton notes, because of the need to provide a wide variety of communications to consumers while leaving them feeling their personal information is safe. Consumers expect personalization, but they also demand privacy. This trade-off is a critical part of the future of the business.
“The key is to provide value while protecting privacy, ” said Stratton.
Yash Chechani, Senior Sales Engineer at Snowflake, describes the ecosystem more literally: “I think users tend to have at least one to two primary services that are their default. Then, for some other content, you might essentially opt in, watch something, and then opt out.”
Content, navigation, communication
“The bottom line is, which service has the most content the viewer wants to watch?” said Chechani. “That to me has proven to be the one aspect that sets a successful streaming media company apart. The problem in this environment is that everybody has their own content. Everybody has their niche, everybody has their content that somebody wants to watch. Do you have enough content to be the primary service for a user?”
Content might be a north star for streaming services, but it is not the only figure in the equation. Another is navigation and user experience. If your main streaming service has the latest popular children’s animated movie but you can’t find it, then in a very real sense, it does not have that movie.
“I think everyone’s joke is ‘I don’t have an hour to find the movie I want to watch,’” said Cassandra Bruni, Senior Product Manager for Industry Solutions at Snowflake. “It becomes really difficult when you’re inundated with so much choice. We see data as a solution to the challenge of effective navigation and search.”
This is where data comes in
Bruni sees data as a solution as well as a challenge.
“Data collection really isn’t a problem,” said Bruni. “There’s no shortage of data. It’s the ability to connect that data together. It’s the ability to answer the integral question of data: ‘So what?’ In terms of recommendations, that is a complex question. What people like, when and why they like it, and where they go from here are questions which, if they can be answered, are answered by leveraging a lot of data.”
And that data is not just about viewer content preference.
There are two pieces of essential data that make up that vast pool of information. First, there’s what you watch and you love—behavior-based data. Another, however, is how a company’s platform performs for the viewer.
“It’s about providing a comfortable, natural viewing experience without interruption, so that the viewer is completely absorbed in the content environment,” said Stratton. “This means that everything from bit rate to design to ad load all needs to be optimized for the viewing experience.”
The key to slowing down churn starts with delivering on subscriber expectations. Salesforce lists the actions a provider can take to meet those expectations, in the following order:
- Deliver high-quality content consistently.
- Make it easy to use everywhere.
- Deliver value for the money.
Surprise and delight
So, in addition to the right content—having what you want to watch—a service must have smart navigation, including an effective data-based recommendation engine, to let you find that content. It must provide that content in a way that does not distract or frustrate. But there’s one more thing a service must have: active communication with its users.
“Many services have anywhere between 5,000 to 60,000 media artifacts,” said Stratton. “It’s not reasonable to expect consumers to know everything that is in there. By leveraging ML, personalization engines can be built to increase engagement and prevent subscribers from leaving because they can’t find the content they love.”
Bruni notes that a tangible challenge to that is that “past behavior isn’t always a perfect predictor of future behavior. Any personalization engine has to keep in mind that people aren’t machines. And so there needs to be a little bit of room for surprise and delight.”
“Recommendation engines try to predict the next steps you’re going to take in your journey, to understand how your taste is evolving and predict where you may want to go next,” said Stratton. “That’s the textbook way of solving the problem. But there are a lot of different ways to optimize personalization.”
Organizations could also build an entire personalization machine to deliver the most captivating next steps on their subscribers’ journey. That said, “There is always a balance between human and machine content curation,” Stratton noted. “The most effective personalization efforts involve both.”
The future of streaming
How will streaming look in the future? How will we experience it?
According to Stratton, bundling across services and creating personalized bundles of content and advertising is one direction the future will take. He also sees an increase in engagement with live content through in-play sports betting and a continued expansion of gamification. Some consumers want to sit back and have a passive experience while others want engagement and activity. One size does not fit all.
Some streaming services are already building games for their platforms, and gaming companies are building games for cloud platforms.
“Games that were traditionally only on a company’s gaming console are now available on smart TVs,” said Stratton. “As data processing gets more advanced and as the streaming capabilities evolve, you’re going to see gaming less as its own community and more as another genre of entertainment.”
Chechani sees a possibility that, once the technology makes it a smooth experience, customization might become more of a part of personalized story creation and not just story delivery, perhaps in conjunction with VR.
Thinking about the industry as a whole, Bruni predicts more consolidation.
“Unfortunately for us all there’s no crystal ball. But, thankfully there are clear market signals for this. I wouldn’t be surprised if at some point we see super-platforms over the top of the consolidation we have already seen. We’ve already started to see it, but I think more is coming,” she said.
She also believes that consolidation is not going to stop with streaming services. We’ll see more partnerships between streaming and non-streaming entities, such as cellular phone services.
In the end, as Stratton noted, you cannot quantify art to its last digit, and television and movies are mostly considered art. Those moments in art which are predictable are never the ones that catch people like wind under a bird’s wing. Those require the aforementioned surprise and delight.
“You can’t always formulate art,” agreed Bruni. “But you can do a really, really good job of using data and technology to help inform what we can do next.”
To learn how Snowflake can enable improved subscriber experiences, click here.