The Subscription Economy Index has forecast the global subscription economy will reach a market size of $1.5 trillion by 2025. At the same time, as the global cost of living hits households everywhere, cash-conscious subscribers are thinking more carefully about the types of subscriptions they maintain.
Several principles apply to subscription businesses across all markets: prioritising strong relationships with existing subscribers, providing exceptional customer service, and creating a positive overall experience that encourages users to remain loyal. In the media and entertainment landscape, these principles are regularly stress-tested every time a viewer tunes in to watch their favourite sports team, whenever a user begins a new trial with a streaming service — and even when a subscriber considers cancelling a service.
The December holiday season is now becoming a pivotal moment in the streaming subscription lifecycle. While some might choose to gift a subscription for various video streaming services to friends or loved ones, many consumers like to put their feet up and enjoy a new TV streaming subscription themselves binge-watching their favourite series or festive movies — and in many cases, cancelling that subscription after their free trials.
For many consumers, especially those wrestling with squeezed home budgets, December has become the time to weigh which subscriptions to lose to cut down on costs for the New Year. A busy live sports calendar, meanwhile, draws in millions of viewers for high-profile events across festive headline fixtures.
Amid ongoing macroeconomic shifts and increased competition, streaming businesses are now under more pressure than ever to demonstrate profitability and retain their audience share. Re-thinking subscriber management to maximise monetisation and user retention is critical to securing long-term profitability. Business leaders who take such steps to future-proof their strategies at the beginning of 2024 will be best positioned for long-term success.
Getting closer to subscribers to tackle the churn cycle
Research from Parks Associates, a US-based market research firm, found the average annual churn rate in the country for OTT video subscriptions this year was 47 per cent. There are many reasons for a user to cancel a subscription, including a desire to reduce household expenses or a service not satisfying consumer expectations around pricing or content.
Quite crucially, churn comes in two very distinct flavours, and streaming providers need to be able to identify and respond to both forms of potential subscriber loss. There can be voluntary or active churn, in which the customer decides to cancel the service; and involuntary or passive churn, when payment failures lead to service cancellation, often without the consumer’s knowledge.
Data from global research firm, PYMNTS, revealed that 24% of recurring payments in the subscription business industry fail due to issues including processing errors, false declines, insufficient funds, and card information changes. These types of collection failures can lead to a massive loss in revenues and subscribers. However, a large proportion of these payments – nearly 90% according to the same report – can be recovered through proven tactics, including intelligent payment retry features backed by predictive AI tools. Many media companies are already harnessing AI-powered capabilities to proactively identify and execute the optimal retry strategy in case of a potential payment failure, increasing their payment recovery rates by up to 70%. Such success estimates can only improve as AI algorithms themselves become more intelligent by training on growing datasets.
Effectively pre-empting voluntary churn and tackling it in real-time requires specialist technology and creative strategies more closely connecting providers with their consumers. Streaming companies that can harness predictive AI and machine learning models to gain a deeper understanding of the potential reasons for cancellation can then respond at exactly the right moment with a range of personalised offers such as upgrades, step-down payments, and pause and resume options to incentivise retention. Small improvements to maximise retention across a huge number of interactions can result in a tremendous increase in revenues — and reduce the need for costly and time-consuming customer re-acquisition tasks.
Driving sports monetisation all year round
And, when it comes to the sports streaming market, providing more personalised user experiences and flexible subscription options are vital to driving retention and revenues. Streaming companies and tech giants are investing heavily in live sports rights to attract and retain viewers, while major sports organisations pursue direct-to-consumer strategies to engage with streaming audiences more intimately and build additional monetisation streams. Ultimately, all content providers need to maximise ROI on high-value sports properties, and that means keeping subscribers engaged all year round — not an easy proposition.
The seasonal nature of sports is a constant challenge for the sports streaming industry. Content providers that want to deliver more user-friendly experiences that minimise churn after the end of a season – or after a major event like the FIFA World Cup or Super Bowl – can now harness flexible subscription options that allow users to easily pause and resume their subscriptions during the off-season.
Retaining subscribers outside the core sporting calendar is just one element of a powerful user engagement strategy. Streaming providers now have more opportunity than ever before, through today’s technology, to get closer to their consumers, moving beyond purely transactional models toward more personalised relationships that unlock cross-selling opportunities and deepen fan engagement. For example, media and sports organisations can embrace a membership community style approach to subscriber management. This type of arrangement can entail additional benefits for sports fans, such as in-stadium concessions, discounts on merchandise, or access to music and entertainment events taking place at their favourite team’s stadium.
Data foundations for global growth
While AI has been utilised in the subscription management industry for the last decade, the recent acceleration of GenAI technologies and their deployment across media technology workflows means AI will remain a central talking point in 2024. Ultimately, media companies want to hear about AI tools that deliver a real business purpose and help them operate more effectively. Today, AI innovation is delivering tangible business outcomes in customer acquisition, retention and monetisation, especially when trained on massive, high-quality data sets based on hundreds of millions of real-world subscriber interactions from across the globe. When it comes down to it, AI technology is only as good as the data it has to work with.
Many streaming media businesses don’t prepare themselves for success. Unlocking new phases of global audience growth and maximising revenues from your subscriber base should be table stakes for forward-thinking streaming companies in 2024. However, many are held back by legacy systems that weren’t designed to scale. Fortunately, refreshing your approach to subscriber management and monetisation with agile cloud technologies and proven expertise is quicker and easier than you might think.