Subscription Based OTT Services: Cancel Anytime
“Kevin Clarkson subscribed to CBS’s All Access streaming TV service shortly before the network’s “Star Trek” reboot premiered in September. He plans to cancel it soon after the season finale.” – WSJ
Streaming service providers not only provide quality video content for their users but also impeccable customer service experiences, of which the freedom to cancel the subscriptions at any time becomes an essential part of their services.
This flexibility, unfortunately, leads to a higher level of cancellation rate than in traditional TV, of which usually requires an annual contract with a deposit of sort. Therefore, streaming service providers, especially subscription based like Netflix, need to spend more on customer retention and development, in the expectation many customers will leave anytime.
According to WSJ, Netflix loses about 7% of its subscribers each year, which is pretty low comparing to many other smaller service providers who can lose more than 50% per year. Although most streaming services are relatively inexpensive comparing to traditional cable, many subscribers still try to “gaming the system a bit”, such as password sharing and unsubscribing regularly.
We think that the core value of OTT services shall be bridging the supply and demand, not simply boosting paid members with negative cash flow. An OTT service provider should attract users with sufficient metadata and content, and collects user behavior and data for advertisers to place more effective ads, the ad revenue shall then be shared with the original content provider. Because in essence, Google and Facebook make money from ads, not original content.