What is "churn and return"?
One of the biggest concerns among content providers and distributors is “churn and return,” also known as “binge and bail.” Both on-demand and live content have become ingrained as part of our daily lives, and as the offer and quality of content increases, so do viewer expectations. This needs to watch the latest and greatest films, series, and live events, coupled with sign-up and sign-off processes, make it easier than ever for viewers to start subscribing when it suits them and stop when they’ve fulfilled their goals without a long-term commitment. Some 31% of viewers have admitted to being serial churners, according to a Deloitte study. But what is the real impact of such high “churn and return” rates, and what can be done to mitigate it?
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What is churn?
The term “churn” refers to subscribers canceling their subscriptions or not renewing. The number of subscribers lost by a content provider or publisher is referred to as “churn rate,” which can significantly impact their profitability. A publisher’s churn rate constitutes a valuable metric that indicates customer retention and how satisfied their subscribers are with the content or quality of service. Unless a survey or “unsubscribe” questionnaire is sent out following the loss, it is hard for publishers to know the real reason behind churn, but other metrics and industry data can often help fill in the gaps.
Churn is typically divided into two main categories:
- Voluntary churn: This occurs when users intentionally cancel their subscriptions. For example, a subscriber may sign up to watch a specific series and, once they’ve finished, decide that the service no longer provides value and cancel their subscription. Voluntary churn reflects the decision-making process of users and often correlates with their content consumption habits and satisfaction levels.
- Involuntary churn: This type of churn is unintentional. It includes scenarios where a subscriber’s payment method expires, or a transaction fails, leading to an unintentional lapse in their subscription. Unlike voluntary churn, involuntary churn does not necessarily reflect a user’s dissatisfaction with the content or service, but it still contributes to subscriber loss and churn rate.
Who churns, and why?
It is perhaps unsurprising that the main culprits of churn and return are younger audiences, with almost half of U.S. millennials (47%) and 34% of Gen Z canceling and then re-subscribing to the same streaming service within a 12-month period. The rate among boomers and older generations is much lower, at 6% and 3%, respectively. The offer of subscription services available and targeted at these younger generations is increasing, as are the promotional offers to capture new users and viewers, making churning and switching more attractive in order to save money and gain access to new content when it suits them.
A preference for flexibility is also evident, as 63% of consumers favor paying on a monthly basis rather than committing to an annual fee. The economy and cost of living are also influential factors when it comes to choosing to subscribe or leave a subscription service. With higher everyday costs such as rent, mortgage payments, insurance, and groceries, viewers are more conscious than ever about spending on luxury goods and services.
The impact of churn and return
The churn and return phenomenon has a direct impact on content providers’ financial health and presents a significant challenge in terms of forecasting revenue and planning for the future. The immediate impact of customer churn is a decline in recurring revenue, meaning limited profitability. But churn and return also impact other areas of business, including marketing, where new campaigns and techniques are required to attract new customers to replace those who leave, or to retain existing ones. This strain on resources increases overhead and can hinder a business’s ability to innovate and grow, thus becoming more attractive to potential customers. As such, it is imperative that content providers and distributors understand the reasons behind churn and plan for retention strategies to mitigate the loss and future impact.
Mitigating churn and return for VoD
In order to mitigate churn and return, content providers and distributors must try to re-evaluate the value they offer their subscribers. Models such as ad-supported video on demand (AVOD), whereby viewers accept more advertisements in exchange for lower fees, can be a win-win solution for many. Personalized experiences may also be a crucial factor for many users considering joining or leaving a service, which could include sharing data in exchange for more tailored content, much like the algorithm-driven models adopted by social media platforms such as Instagram.
Adding live events, games, and bundled deals to current subscriptions can also be key retention strategies, keeping users engaged and even generating new revenue streams. Some content providers have even employed “pause and resume” options instead of leaving it up to subscribers to churn completely. This strategy allows them to temporarily stop payments and access the service, helping to maintain revenue and making it easier to forecast financial needs. Each of these techniques can help increase customer satisfaction and retention, ultimately leading to less churn and return and helping providers maintain a more profitable, long-term business model.
For more information on reducing churn, to find out about System73’s Data Logistics Network, or to speak to a member of our team, visit www.system73.com.
