As OTT service evolves, keeping consumers happy means ensuring the best viewer experience possible. Daniel Hurwitz, Chief Revenue Officer, Penthera, shares his insights on the features that add value and inspire loyalty.

Cynopsis: We read a lot about churn rates in the OTT video space. In fact a recent study from Parks & Associates showed that over one-quarter of current OTT video service subscribers have cancelled an OTT video service in the past year. Why are churn rates so high across the industry?

Dan Hurwitz: We’re in an exploratory time, and OTT is still relatively new. So I think right now there are a few primary reasons churn is so high.

One is that currently, providers aren’t requiring long contracts. Unsubscribing is easy. Plus, most give free trial periods, so a user can download an app, and if they don’t like it, they can quickly get rid of it. There’s also, realistically, only a certain number of streaming apps you’re going to use, and therefore a saturation point of apps a user will pay for. A user will quickly realize that they’re paying $9.99 or some amount for a service that they aren’t really using, and they can and will easily delete it to save money.

These factors make it easy for users to churn. When combined with user experience issues, viewers won’t hesitate to leave a service. If video providers want to prevent this, they need to give users real value. There are three key ingredients that are critical for success.  

Firstly, you have to give users compelling content. Without it, you won’t even be able to enter the competition. You also need to remove friction so the viewer can seamlessly enjoy your content. It’s important that users have a good experience every time they open your app, and you need to solve for the problems they may encounter (even if they’re not your fault, like connectivity issues). Third, you have to make it easy to find content on your platform.

The services that excel at all three of these ingredients, like CBS and Netflix, are gobbling up the market share. The services that don’t get all three right will struggle to grow or even maintain their market share in an incredibly competitive marketplace. Results: Churn rates will soar.

Cynopsis: Subscribers often balk when a video provider they subscribe to, like Netflix for example, increases monthly subscription costs. How can providers increase revenue without annoying their users?

Hurwitz: Again, it’s about value. Give users value and they won’t mind price hikes. If CBS increases my payments by a couple of bucks a month, for example, but offers new features that I’m excited about, then I’m ok with it.

Innovations like removing friction and adding new content are table stakes, and you can’t charge more for that because users already expect to have it. You have to be innovative to give users new features. Netflix is a great example, actually, because they’ve innovated with new features like Smart Download, which launched last year. New features add value and foster loyalty, so that users won’t mind as much when that value reflects in their monthly costs.

Cynopsis: What do you think are some of the biggest business mistakes OTT video providers are making? 

Hurwitz: I think the biggest mistake is that they’re investing billions of dollars into developing new content, but they’re not investing in the viewer experience or discoverability. Having great content is important, but if I can’t find it or watch it seamlessly, what’s the point?

In fact, I just read a recent Nielsen study this morning where over half of respondents said “accessibility/search of desired content” is an important factor to them when judging streaming services.

Having an OTT service that doesn’t prioritize the viewer experience and discoverability is like hosting a party where the food tastes bad and you can’t get a drink because there aren’t enough bartenders. People will have a bad time. It’s not enough to have content, you have to make sure you’re creating a flawless user experience.

Another mistake I see is that a lot of big media companies are resting on their old-school laurels. Video technology is changing fast, and you have to be spending time, money, and resources in innovation. Otherwise, you’ll get left behind.