Beyond the Play Button
Combatting churn by bridging the gap between subscribers and content
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In the past couple of years, the streaming entertainment industry has pivoted from a relentless pursuit of subscriber acquisition to a more measured quest for profitability and efficiency. However, this shift may have brought unintended consequences, notably an uptick in churn rates, hinting at a potential oversight in long-term retention strategies.
While securing a rich content library remains pivotal, I’ve learned from over a decade working at Netflix and studying consumers that we often underestimate the power of how we design the experience. After reviewing the data in Hub's recent Conquering Content Study about customer perceptions of online video recommendations, I wanted to delve into the nuanced art of content recommendation—a seemingly simple yet under-leveraged tactic that can help bridge the gap between subscribers and content, thus building sustained viewer interest and loyalty.
The Rising Tide of Churn
Recent data reveals a worrying trend: customer churn rates are on the rise. Across the industry, the rate of customer defections rose to 6% at the end of January. That's up from 5.2% a year earlier, according to the Wall Street Journal. And Parks Associates estimates the annual churn rate is 47%. This high churn rate may continue to be exacerbated by the rise in “serial churners” as people hop around services and by continually rising subscription prices.
Despite these challenges, a focus seems to remain on acquisition, as evidenced by aggressive promotions and high-profile content deals seemingly designed to draw in subscribers. For example, Starz, estimated to have one of the highest churn rates among streaming services, recently had a promotion offering 6 months for $20. And Peacock’s large $110 Million Wild Card Game deal seems to have been a successful acquisition deal, but it’s unlikely the single game would help much on the retention front. So the question looms: are efforts like these translating into long-term loyalty?
The Underestimated Power of Content Recommendations
Content plays a crucial role in subscriber retention for streaming services. Engaging and relevant content drives subscriber satisfaction and loyalty, leading to higher retention rates. Content quality, variety, exclusivity, and freshness all play critical roles in satisfying subscribers across a variety of needs. For services to ensure adequate content within current financial constraints, expect to see more mergers, partnerships, and bundles this year to boost content offerings.
And beyond the content itself lies a key challenge of connecting viewers to that content. Surprisingly, a mere 10% of consumers feel fully satisfied with the recommendations provided by their streaming services, suggesting a significant failure to connect subscribers to the right content. This gap not only undermines the value of existing content libraries but also highlights a missed opportunity to enhance viewer engagement.
Connecting subscribers to the right content is critical to maximizing the large investments in that content. And despite the ability to deliver more personalized content promotions online, linear TV appears to be more effective at introducing new content via its promotional strategies than streaming services have been where users are relying more on external recommendations. This suggests a real opportunity to improve how we promote our content on the service.
Enhancing Recommendations in a World of AI
When it comes to recommendations, the role AI and machine learning have in improving recommendation algorithms is undeniable. Yet, in order to truly resonate with viewers and reduce churn, these technologies must be complemented (and even trained) with a human touch and a deep understanding of user experience. Based on extensive industry insights, here are a few key strategies to enhance the effectiveness of content recommendations:
Building Trust: A Foundation
Trust is the bedrock upon which effective recommendations are built. The first chart above shows that nearly one-third of viewers perceive recommendations to be skewed toward the interests of the service rather than their own. To cultivate trust and encourage higher adoption of recommendations, streaming services should consider the following:
Authenticity is Key: Ensure recommendations genuinely reflect the viewer's interests, rather than serving as thinly veiled promotions. Consistently prioritizing the viewer's best match is of the utmost importance in building trust.
Transparency and Clarity: Offer clear explanations and proof points for why specific titles are recommended, providing viewers with a window into the logic behind these suggestions.
Responsive Feedback: Integrate mechanisms that allow viewers to provide feedback on recommendations, and visibly adapt future suggestions based on this input.
Consistent Engagement: Maintain communication with viewers across various touch points, subtly seeding ideas for their next watch, thereby building anticipation and engagement.
Empathy and Passion: Demonstrate a shared enthusiasm, aligning with the viewer's passions and interests, which can transform a mere suggestion into a compelling invitation to explore new narratives. Stating something to the effect of “We’ve added 15 new comedies this month” shows a mutual passion for the genre and emphasizes that this recommendation is one we’ve picked especially for you, not simply the latest title added.
Personal Touch in a Personalized World
I’ve witnessed across many tests that the distinction between a recommendation feeling “personalized” versus “personal” can dramatically influence viewer reception. It’s important to be both and make the recommendation feel catered specifically to the individual. A couple suggestions to create this feeling include:
Storytelling and Presentation: Utilize engaging narratives, video clips, and trailers to infuse recommendations with a sense of personality, making them feel handpicked and special.
Contextual Sensitivity: Recommendations that are aware of the viewer's current context (both in the algorithm and in messaging) can feel more personal, such as taking into account the time of day, device used, and whether one is watching alone or with others. Recognizing that a specific customer is more likely to watch horror on the phone late at night versus family comedies during the day on the SmartTV can feel more personal. Also, the context in which it’s presented, such as what a recommendation is juxtaposed against, can help. A new and unfamiliar recommendation next to one that is already proven to be liked can be received differently than one nestled between other unfamiliar titles.
Cultivating Familiarity with the Unfamiliar
With the vast amount of content continually being added to libraries, viewers are increasingly confronted with unfamiliar titles. People will always gravitate towards what’s familiar whether or not it’s the best match for them. Here are a few ways to make new content more familiar and approachable:
Highlight Connections: Draw attention to familiar elements within new titles, such as actors or directors they have been drawn to previously or thematic links to genres or cultural phenomena. Even a favorite city where the content is set may draw in a viewer to a genre they otherwise dislike.
Strategic Placement: Present unfamiliar titles within thematic collections or alongside familiar content within the user interface to provide a contextual anchor that piques curiosity.
Sneak Peeks: Offer glimpses into the content through trailers, clips, or behind-the-scenes moments, making the viewer feel like a special insider.
As the streaming industry evolves, so too must our approach to viewer engagement. By prioritizing sophisticated, trust-based recommendation systems, we can not only enhance the viewer experience but also pave the way for sustainable growth and retention. This journey beyond the play button into the realm of smart content discovery marks a pivotal step towards redefining and strengthening relationships with our viewers moving forward.
ICYMI: Hub in the News
Streaming Brands Struggle to Find Identity With Consumers
“As big streamers aim to be all things for all people, viewers are struggling to identify what distinguishes them from each other. Until streamers develop more brand-defining features, viewer loyalty is at risk and consumers will continue to churn as they chase shows across services.” - Jason Platt Zolov, consultant for Hub.
Leveraging Hub’s annual Evolution of Video Branding Study here are 5 perspectives on the identity crisis faced by major streaming brands:
IndieWire: Half of Streaming Users Don’t Know Which Service Their Favorite Show Is On
Next TV: Apple TV Plus Has the Lowest 'Brand Identity' Among U.S. SVODs
Advanced Television: Research: SVoDs struggle to find identity with consumers
Media Play News: Hub: Consumers Struggle to Differentiate Between Streaming Platforms
Streaming Media: The Struggle for Brand Identity Across Multiplatform Streaming Apps
The Streamable: Viewers Struggle to Differentiate Streaming Services, Pick Subscriptions Based on Individual Titles
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About Hub Entertainment Research
Hub Entertainment Research, which celebrated its 10th anniversary in 2023, tracks how technology is changing the way people find, choose, and consume entertainment content: from TV and movies to gaming, music, podcasts, and social video. Hub’s studies have covered the most important trends in providers, devices, and technologies since 2013. We work with the largest TV networks, pay TV operators, streaming providers, technology companies, and studios to assess the present and forecast the future.
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