OTT Churn represents the number of subscribers who cancel their subscription to an OTT platform. It is no rocket science to guess that the churn rate tells you whether your OTT business is growing upwards or downwards.
In this post-pandemic era, the OTT churn rate is at an all-time high. Especially because people now have lesser time to watch OTT content due to the reopening of workplaces. So, they now have started contemplating which subscription they should retain, and which one they should cancel.
And the result of it is quite evident. According to a survey report, the OTT churn rate of Q3 2021 was 45%!! Thus, the signs are clear – if you want to retain your subscribers, you will have to think out of the box!
In this blog, we will be discussing some of those out-of-the-box ideas that will help tackle the OTT churn. But before that, let’s briefly discuss the types of OTT churn, so that you can take the right decision to tackle it appropriately.
What is OTT Churn?
We are not going to elaborate on the textbook definition of OTT churn, as you already know! It is simply the number of subscribers who have bidden adieu to your platform for good. But, is it always intentional, or can it happen unintentionally too?
Let’s find out.
In voluntary churn, your users leave your platform at will, because they are either not liking your offerings, or it is costing them an arm and a leg. If you experience voluntary churn at a high rate, then you must think very seriously about what you can do to tackle it.
How many times have you forgotten the renewal date of your subscription? You must have, at least once right? The same thing can happen with your customers too!
Involuntary churn refers to scenarios when your customers have either forgotten to pay, lost their credit cards, or forgotten to update their new payment/card details on your platform.
More often than not, you get back the customers who left you by involuntary churn.
How to Calculate OTT Churn?
So, the question comes, how can you calculate the churn rate of your own OTT platform? For this, you need to know the number of active cancellations (A), passive cancellations (P), win-back reactivations (W), and total subscribers (T).
OTT Churn Rate can be easily calculated using the formula: 100 × [(A+P)-W]/T
If you want to understand the process of churn rate calculation in detail, read our blog on OTT Churn and Churn Management Strategies.
Why Does OTT Churn Matter?
OTT Churn impacts your subscription-based OTT business in multiple ways, but the three main impacts of OTT churn are discussed below.
Effect On Customer Lifetime Value
The customer lifetime value (also known as CLV) is the average revenue generated by a single customer before their churn. Let’s make it a bit more understandable for you.
Suppose you have a streaming platform where you provide cookery videos every week. You have kept a subscription plan of US $15 for one month.
When a person visits your platform for the first time, it is obvious that they won’t subscribe to your services immediately. You need to release some sample videos which they can view for free. You may also need to follow up using emails and live interactions. All these efforts that you make to convert a lead into a customer are known as the customer acquisition cost (CAC).
Let’s assume that your customer acquisition cost for this particular individual is US$ 50. It means that to generate profit out of this customer, you will need a minimum subscription period of 4 months. If the customer leaves your platform before that, then it’s a loss for you!
But let’s imagine that this customer stays for one year. Then, he/she will generate a net profit of UD$ 130. If this customer churns out after 12 months, then the CLV for this customer will stand at $180. And the CLV to CAC ratio stands at 18:5
Now you might have already guessed that if your OTT churn rate is extremely high, and your customers leave you within a short span, then your CLV to CAC ratio might hit the negatives. This will directly mean that you will not get investments for your business easily.
Effect On Customer Acquisition Cost
If you have been long enough in the OTT industry, you may already know how churn can shoot up your customer acquisition costs (CAC) drastically. But, for those unversed, we are explaining it below.
Continuing with the previous example, where the customer needed at least 4 months to generate profits, suppose the customer leaves after two months. It means that you spent $50 for acquiring that customer, but generated revenue of only $30, with a net loss of $20. On top of that, you will now have to spend another $50 to acquire a new customer in the first place.
It means that this time, you need to recover the loss of $20 from the new customer, in addition to the usual CAC of $50. Hence, your accumulated CAC stands at $70. And with every “bad churn”, this number will keep increasing.
Unsustainable For Business
If this cycle of increased CAC and high OTT churn continues, then you might find yourself in a situation where you will not have enough budget to spend on marketing and hence, you may need to force-cut your CAC. Such type of situation is not at all desirable for an OTT platform that wants to be profitable and sustainable in the long run.
3 Main Reasons For OTT Churn
Multiple surveys in the past have shown that the three principal reasons behind OTT churn are Subscription Price, Quality of Offerings, and the overall experience of the user.
If the price of your subscription is too high, and the deliverables are not up to the mark, then OTT churn is inevitable! If you want to avoid churn, you will have to carefully analyze the true value of your videos and the rate at which your competitors are streaming them.
Quality of Content
After price comes the quality. Statistics have shown that viewers never want to watch a low-quality video even if they get it for minimal or no cost. So, if you want to establish your OTT platform, producing high-quality content is the key.
Bugged platforms and crashed apps are among the biggest roadblocks to OTT success. So, while developing your platform, ensure that your user interface is user-friendly, and does not suffer from crashing very often. In case your users face any issues, they should have a proper user support channel through which they can reach out to you.
Want to know more reasons for churn? Read Factors That Affect Customer Attrition.
Use Add-Ons To Tackle Churn
In the current OTT industry, almost every platform is doing competitor analysis, delivering quality content, and trying to engage with their consumers as much as possible. But still, the OTT churn rate is highest at this point. Do you know why? It is because of higher competition amongst platforms, and lower viewing time from the viewers.
As the viewers now have less time to binge, they have been extremely picky when it comes to OTT subscriptions. The equation is now simple – if you want a low churn rate, you will have to stand out amongst the crowd. And this is not possible without innovative ad-ons! In the following sections, we are going to discuss four ad-ons that will help you tackle OTT churn effectively.
The merchandise market is growing at a rapid pace nowadays. But there are very few OTT platforms that allow you to sell your merchandise at the same place where your viewers are watching the movie. Do you want to create one such platform which is a 2-in-1? Connect with Muvi!
With Muvi, you can integrate Muvi Kart into your OTT platform, and transform your OTT platform into an e-commerce platform! Now, your users won’t have to go to some other page to buy the merchandise related to their favorite movies! They just need to check the product link given below the video and click on it to buy the product.
Recently, OTT giants like Netflix and Disney+ have proposed Ad-supported plans to tackle churn. Along with AVOD, Pay per view (PPV) is also growing more popular day by day. So, if you want to remain in the race, you should adopt innovative revenue models too.
Muvi customers can implement different types of monetization schemes efficiently into their platforms. We support multiple ad server integrations, customized Pay-Per-View content, and Pay-Per-View Bundles. With our features, you can give much greater payment flexibility to your customers.
Focus on User Experience
At Muvi, you can design a very user-friendly platform with personalized content and theme-based design. You can integrate the theme identities of your content into your platform to increase its user appeal.
For example, imagine that you are developing a Harry Potter-themed OTT platform. You can easily integrate the logo, photos of Key characters, and buildings like Hogwarts at different places on your website. This will help in delivering a next-level experience to your customers.
Virtual Events and Fan Meets
Who said that you can monetize only videos? Muvi lets you monetize your fan meets and virtual events too! In fact, you can stream any live event and monetize the same. It will help you add extra sources of revenue to cover up the losses from high churn rates.
Muvi Playout is a unique setup that allows you to launch your online live TV and stream your content. In fact, with playout, you can schedule and broadcast your on-demand content on multiple channels simultaneously. Hence, it helps reduce the sole dependence on subscription-based VOD on your OTT platform.
Want to try Muvi Playout? Start your FREE trial of 14 days today! No credit card, no agreement, only trial.
With ad-ons like movie merchandise, innovative monetization, sponsored channels, live events, and virtual meets, you not only give your users a reason to stay, but you create multiple new revenue models too! Thus, you can decrease your churn rate while recovering from your previous losses simultaneously.
If you want to experience our platform and launch your OTT platform with us, connect with us today! At Muvi, you can launch your OTT platform instantly, without writing a single line of code. Start your free trial today!