With streaming services facing alarmingly high rates of consumers subscribing to a product and then churning out of it, Magid has released new data from its SubScape service that indicates those high churn rates hide a more important insight: Not all churn is the same and not all churn is bad.
The company’s latest product SubScape is designed to offer prescriptive solutions for acquisition and retention in the ongoing streaming wars and is based on newly identified audience segments that reveal key insights about subscriber motivations and solutions for engagement.
Developed by Magid’s Subscriber Science practice, SubScape defines, collects, and calculates proprietary SVOD (as well as AVOD and FAST) metrics that it says will help explain the “why” of churn and provide users with insights and data to predict outcomes, optimize stability and maximize profits in a highly competitive entertainment ecosystem.
“The media industry is at an inflection point as savvy consumers are presented with an unending list of viewing options,” Brent Magid, CEO, and Kate Morgan, chief product officer and head of the Global Media, Entertainment and Games practice at Magid said in a joint statement announcing the first results from SubScape. “The battle for the acquisition and retention of churn-centric subscribers isn’t slowing down which is why leveraging SubScape’s granular, solution-based insights have been mission critical for our clients as they reimagine their streaming playbook for long term growth.”
Some of the topline metrics from the service are indeed alarming. The new service found that between January and October 2023, the top 20 streaming services, on average, experienced a subscriber loss of 8% and a gain of 8% per month, realizing an average net growth of zero in the U.S.
In addition to the alarming finding that 8% of subs drop a service in any given month, the new data also found that 40% on average said they may cancel or are likely to cancel the individual paid service used by their home in the next year.
But the researchers stressed that a closer look at SubScape data indicates that not all churn is bad and that some attractive audience segments are predisposed to churn.
Understanding the various audience segments can provide steamers with a competitive advantage and guide streamers toward increased market share and profitability, the researchers reported.
More specifically, Magid breaks down the streaming audience into different segments that need to be approached and understood differently. These include:
- Hypers, a high churn, high income segment that the researchers say is important for streamers looking to drive growth and word of mouth. Of all the segments, Hypers score the highest on the following areas: 46% agree that “I have FOMO “fear of missing out” about certain shows”; 51% agree: ‘I like to post, like, share on social media about my favorite shows/actors”; when asked about the individual paid services used by their home, 55% of Hypers say they may cancel or are likely to cancel that service in the next year.
- Another key segment is Loyalists, a high spending low churn segment. Of all the segments, they are the most open to ads. Among this group 81% agree: “I’m fine watching some ads/commercials, if it saves me money”
- Digitarians: A high churn segment with equal interest in video on social platforms like YouTube and TikTok, they’re free promotion seekers who do not represent a high ROI on marketing dollars. They are also the mostly likely segment (14%) to be in a free promotional period or borrow an account from another home
- Pragmatics: A smaller segment (just 10% of the population) that is nonetheless a critical revenue-driver for certain services with libraries that map to its emotional needs. In this segment, 70% agree: “I avoid watching ads/commercials as much as possible” (Tied with Hypers for the top score)
- Mainstreamers: A laggard segment, this low churn group is an important component of stability in a mature SVOD, but rarely strays beyond the top five services. Mainstreamers score as the lowest subscriber segment on the following questions: Only 24% agree: “I’m usually the first of my friends to try a new video service”; Only 25% agree: “I have FOMO “fear of missing out” about certain shows”; Only 24% agree: ‘I like to post, like, share on social media about my favorite shows/actors” (lowest subscribing segment); 77% intend to stick with a service for at least a year.
- Inerts: The oldest of six segments, with a lower interest in video overall, Inerts present the lowest opportunity to drive revenue.
Magid researchers argue that data from those segments indicates that “Not all churn is equal. There is a difference between `bad' churn vs `strategic' churn with the latter consistent with strong long-term growth. While perceived service weakness may play a role in churn, churn is often fueled by a segment’s inherent volatility and the attitudes/behaviors that subscribers, like Hypers, bring with them, such as a fear of missing out (aka FOMO). Services that consistently deliver culturally relevant content will attract these transient FOMOs.”
“Some high-churn segments show value in other ways,” Magid also reported. “With new content driving interest, a service’s vibrancy and health is in part measured by its appeal to some high-churn viewers. And one of these high-churn segments, Hypers, carry the most number of services at any given time and are also the best word-of-mouth drivers in a streamer’s customer base.”
The new data also indicated that AVOD is a significant time competitor to SVOD and that income and Churn don’t always go hand in hand. “Although it might seem counter-intuitive, having less disposable household income isn’t always predictive of churn propensity,” the researchers said. “Hypers, the highest income SubScape segment, also has a high proclivity to churn.”
This indicates that streamers are often looking at the wrong metrics. “Traditionally, average subscriber tenure and churn rates was an indicator of business health,” the researchers said. “But research suggests the more accurate metric is the number of total subscribed months (whether or not they’re contiguous), which recognizes that some subscribers who leave quickly also come back quickly.”
More information is available here.
