Revenue season is officially on, and Eunice Shin has her eye on streaming service owners’ abilities to retain subscribers.
“In a world where economic uncertainties still exist, where content quality continues to be based on hits and lots of bombs, how do we think about unsubscribing and how do these streaming platforms keep the customers they have worked so hard to win in an increasingly competitive and price-competitive world?” said Shin, a partner at strategy consulting firm Prophet who has consulted with companies including Disney, Warner Bros. and NBCUniversal, in the latest episode of the Digiday podcast.
This is a big question, all the more urgent given the shift in focus of the streaming market from subscriber growth to profitability. Following the pandemic-induced surge in streaming subscribers, this growth began to slow in 2021 and further into 2022, to the point where Netflix actually lost subscribers. Then, with the economic downturn and the looming threat of a potential recession, investors turned their attention to the money companies are spending — and often, losing — on their streaming businesses, wondering if the streamers’ subscriber numbers justified their programming costs.
That’s why Shin keeps an eye on streamer churn rates.
“If you think of all these streamers as they were launched – most of them during the pandemic – when people spent a lot of money to acquire these customers, which means not only marketing dollars , but content dollars in content investments to be able to attract people to these platforms, how do they keep them…. Even if you think about subscriber growth, if your churn is high, it’s like one step forward, two steps back,” she said.
Here are some highlights from the conversation, which have been edited for length and clarity.
Fight against churn
It’s been Netflix’s strategy this whole time to give you a sense of volume. Once you watch “Emily in Paris”, what’s next and what’s served to you is super important to know, “Am I coming back tomorrow or am I going to feel like I’m not don’t need this streaming platform this month?”
The ideal termination rate
Everyone has always tried to get it under 5%. This is the ideal state.
The Age of Streaming Consolidation
We are rapidly entering a world of aggregation again. Everything we’ve seen in the cable world before now, I think we’re going to end up in a world of streaming aggregation where there’s going to be, “How can we show additional value to consumers by subscribing to something something a little more expensive but who does it bring you more?
The free alternative to ad-supported streaming TV? not so fast
I don’t know if that’s throwing a dagger too hard, but I think the [free, ad-supported streaming TV] services only resonate with a certain number of generations in our population. If You Were To Look At Gen Z Behaviors, None Of Them Turn On Pluto [TV] to watch old reruns of “Gilligan’s Island” or whatever. This type of content does not resonate.