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An on-demand video subscription isn't just for Christmas... Oh. It is

OTT services must overcome hideous churn rates to find success

Premium video content is a must have for the Christmas period and to avoid missing out consumers are signing up to a multitude of over-the-top (OTT) services, but this will only be a festive fling for a large proportion.

According to results of a recent survey from UK subscription and billing specialist PayWizard, 69 per cent of respondents that plan to go OTT this Christmas would consider signing up to more than one OTT service over Christmas. Of these, 41 per cent are already subscribers to an OTT service, but are still considering additional subscriptions to expand their choice of content.

This might not have a happy ending for some OTT services, as 40 per cent of planned subscribers intend to scrap their subscription after just three months and 56 per cent after six months – for many, this will be when the free trial or discount period ends, thanks to subscriptions offers from "Black Friday". The findings state that 21 per cent of planned subscribers are “free trial bingers”, who will cancel immediately after finishing certain content or, alternatively, purchase a subscription as a present for someone else – presumably for someone living in the same house as them.

The battle for content is a fierce one, and with such a high percentage of potential subscribers planning to ditch the service after just several months, even the powerhouses of the market such as Netflix need to up their content game after Christmas to hook these “free trial bingers”, which come from all demographics. For current OTT users, 17 per cent of global respondents said "there isn’t much to watch" – with 25 to 34-year-olds, who make up the largest constituent of OTT viewers, feeling the most neglected and saying they were least likely to continue their service.

Out of respondents from the US, UK, Brazil, Germany, Australia, and Singapore – Brazilians are keenest for content, with 50 per cent planning to subscribe to an OTT service prior to Christmas, and 67 per cent of those considering subscribing to more than one OTT service. The US came in 2nd for both categories with 31 per cent and 62 per cent.

This suggests there will be a serious amount of binge watching in The Americas throughout December and January, but why not take advantage of the deals on offer – 37 per cent of US respondents said that OTT services offer good value for money, more than any other country. However, 30 per cent of Americans surveyed said that services being overpriced was a reason not to go OTT. US consumers also watch the most pay TV and are the most likely to use pay TV, with 80 per cent adoption. The US also has the highest pay TV subscription prices, and OTT is a fraction of the cost, so we’re a bit surprised that they say OTT is expensive.

Only 24 per cent of German respondents believe OTT offers value for money, the lowest of the six countries surveyed. German consumers also watch less TV overall than any other region, despite having the highest number of satisfied subscribers, with 40 per cent of respondents saying OTT services have "lots to watch", which is tied with Australia. UK consumers are the most careful with their money, with 35 per cent stating that OTT services are "too expensive", but ranked highest for viewership of free catch up services, such as BBC iPlayer. Respondents from Singapore watch more free streaming services than any other country, with 33 per cent.

Although the popularity of OTT is indisputable, PayWizard says that its business model is still proving to be a challenge. It gives the example that Sky, one of Europe’s largest pay TV operators, expects more than $15 billion in turnover this year, but a monthly churn rate of just 0.9 per cent. Comparatively, PayWizard’s research suggests that based on the people planning to leave a paid OTT service in the next month, the average monthly churn rate is a staggering 6 per cent.

“While OTT is disrupting the entertainment market, it’s pretty clear there is much to do to keep customers subscribed for a sustained period of time,” said Bhavesh Vaghela, CMO at PayWizard. “This global survey shows that key demographic groups like the over-55s are not being catered for, while the core 24-35 working adults are running out of relevant content that is of interest to them. If OTT providers are to succeed in a highly competitive environment, it’s essential they provide a more personalized service based on a full understanding of the customer behaviours and viewing habits.”

Copyright © 2015, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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