Retention and Churn
The overall OTT churn rate continues to hover around 40%. Traditional players have long-term contracts and cross-sell bundles to keep customers subscribing to the service, sometimes unwillingly. OTT services, on the other hand, with their lack of contracts and termination fees and the sheer number of competing services, are much more susceptible to churn. vMVPDs, a subset of OTT services, are at even higher risk for churn because of their higher costs compared to standalone OTT services and their relative uniformity across providers. While the vMVPD churn rate decreased to 49% in Q3 2020, it is still higher than overall OTT services.
The final and potentially most challenging part of the OTT video consumer journey is retention. Many internal and external forces are at play that make it difficult for OTT video service providers and other companies in the digital media and entertainment space to retain their customers. If the value of all aspects of the service offering, from price to content to user experience, meet or exceed a customer’s expectations, then there is a higher likelihood that a service can retain its customer. Otherwise, a service risks customer churn. For OTT services, customer churn is a major concern especially as compared to churn rates of traditional pay-TV providers via cable and satellite TV operators.
Subscribers Cancelling Services as % of Subscriber Base US Broadband Households
Q1/2020
Q3/2020
Q3/2019
100%
80%
60%
40%
20%
0%
All OTT Services
vMVPD
© Parks Associates
The churn rate has slowed some for both overall OTT services and vMVPD services. Consumers have more time at home to properly assess the value of a service to determine if they want to keep or not. Churn may continue to decrease, as households are not experimenting as much with newer services to try out as they were at the beginning of COVID-19. However, churn still represents a direct threat to the viability and growth trajectory of many services.
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