Churn Remains a Challenge for VMVPDs, Likely to Persist, Parks Panel Told

As virtual MVPDs continue to poach customers from traditional pay TV, the need to address one of their most appealing differentiators -- no-contract subscriptions -- continues to challenge the segment, said Parks Associates analyst Paul Erickson at the company’s virtual Future of Video conference last week. “There’s a higher level of churn than in traditional pay-TV services,” a factor that’s “likely to persist,” said Erickson, asking panelists what strategies vMVPDs could adopt to stem customer defections.

Nic Wilson, TiVo head-customer success, noted that traditional pay TV has been effective at bundling other services -- phone, broadband, mobile, security -- which makes customers less likely to leave. “What other parts of someone’s life can you offer them value [for]?” he said. One possibility is to bundle over-the-top subscriptions like T-Mobile’s subscriber retention tack. “Find those services so that if they cancel your service, they’re not just canceling video," he said.

Wilson predicted more parity among services, including on price, which will demand that vMVPDs find ways to make their service stand out, suggesting aggregating content from different video services, offering more free and differentiated channels, and creating a model around hardware. He cited Sling TV with AirTV players, Google’s integration of YouTube TV with Chromecast players, and his company’s Stream 4K direct-to-consumer device, which offers native integration with Sling content. “If there are ways that you can differentiate with that capital investment in the hardware,” a customer may think, "I bought this device, so I might as well stick with what I have,” he said. It’s up to vMVPDs to create reasons for customers “to not look somewhere else” for service. Once customers start looking, “you’re at risk,” he said.

Erickson said the user experience is important to reduce subscriber churn, whether it’s superior content aggregation or a smarter, more personalized experience where relevant content is surfaced to subscribers. That can help retain customers in an environment where “people are bombarded by choice.”

Michael Ribero, ViacomCBS’ Paramount+ vice president-global marketing, echoed the importance of not giving customers a reason to look elsewhere, and the TV viewing experience is part of that, he said. A vMVPD service “has got to work, and it’s got to work like regular TV.” To ask someone from the traditional pay-TV world to come over to a vMVPD service means there can be no change in quality of service from pay TV, “which worked 99.9% of the time,” Ribero said. “I can’t say that always happens in the virtual world.”

Customers particularly aren’t forgiving of a subpar sports experience, Ribero said. “If you have any sort of buffering or any sort of lapse, there’s no amount of customer service, there’s no amount of rebate -- people hate you and they want to leave.” TikTok is training a new generation of content viewers to expect “.01 seconds of latency,” he said. “If we as an industry can’t meet those same sort of expectations … we’re going to be fighting an uphill battle.”

In addition, the vMVPD experience should replicate the immediacy of over-the-air and MVPD TV viewing: “Being able to turn on [the TV], and something is just on,” Ribero said, would counter OTT viewers’ increasing “discovery fatigue.” It’s also important to let customers know that a vMVPD service is a complement to Netflix and Hulu, not a competitor, as consumers try to make sense of the myriad content options, he said.

Ribero said it may be time for the industry to change the way it measures churn to reflect the different needs of the OTT model. A football fan who returns to a football package season after season doesn’t fit an old churn measurement model, he said: “Is that a win or not?” He suggested different metrics, such as measuring months of recurring revenue, percentage of viewers returning each sports season or other key performance indicators that “acknowledge the shift … in the way people are using vMVPD services vs. traditional pay TV.”

Greg Riker, head-business development and sales, Americas, for Comcast's Metrological, referenced content churn vs. provider churn. A channel or app might be interesting to a subscriber for a finite period of time for whatever reason, he said. The ability to do “subscription management” based on channels within a bundle would give vMVPDs a “value-add” over other services. An AI-based algorithm that understands subscribers' viewing interests could serve suggestions to swap channels for one more closely aligned with their interests. That would be a way to drive value for the service, he said.