Involuntary cancellations a huge problem for the SVOD industry

Tuesday, March 19th, 2019 
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New Study Reveals the Average Online Video Subscriber in the U.S. Subscribes to 3.4 Streaming Services and Pays an Average of $8.53 Per Service

  • Third-party commissioned research shows discounted offerings are an under-exploited opportunity for service providers—but involuntary customer cancellations are a huge industry problem.
  • Hulu subscribers more likely to cancel than Netflix subscribers.

SAN MATEO, Calif. — Vindicia, an Amdocs company (NASDAQ: DOX) and a leader in business-to-consumer digital services monetization, today released a study it commissioned from nScreenMedia that delves into consumer relationships with streaming video services and viewing behaviors. The study, “Keep My Customer” – Why Consumers Subscribe To, Stay With, Cancel, and Come Back to Online Video Services, found that 70% of households in the U.S. and 40% of U.K. homes have a subscription to at least one streaming video service, and that the average subscriber in the U.S. watches 3.4 services and pays an average of $8.53 per service.

One of the study’s major findings is that involuntary cancellation is a serious problem for the industry. These payment failures occur when a credit card problem, such as insufficient funds, results in automatic cancellation of a customer. The study revealed that over a quarter of U.S. and a third of U.K. online video streamers have had a subscription video on demand (SVOD) service canceled due to a credit card problem. And of those groups, 30% did not return to the service.

“Involuntary cancellations are a huge problem for the SVOD industry, particularly among young subscribers,” said study author Colin Dixon, Founder and Chief Analyst at nScreenMedia. “Young adults from 18 to 34 years old are twice as likely to have experienced involuntary cancellation in the U.K., and three times more likely in the U.S.”

“For video streaming services, the ability to acquire and retain subscribers is vital to their success,” said Anthony Goonetilleke, group president, Media, Network and Technology, Amdocs. “However, streaming services are losing subscribers—and millions of dollars in annual revenue—due to involuntary credit card cancellations. This kind of customer churn is largely preventable. By leveraging the right intelligent technology, video streaming providers can recover failed payment transactions and capture revenue that would otherwise be lost, enabling them to better compete in a highly competitive market.”

Cancellers can be persuaded to come back

In terms of overall cancellations, the survey looked at how often people cancel their service and their reasons for doing so. In the U.S., 38% of the survey group say they have canceled one or more services in the last year. Of that group, two-thirds say they had canceled one service only, and just one-in-ten have canceled three or more services.

Netflix users are slightly less likely than average to have canceled service in the last year. Hulu users are slightly more likely. And Amazon Prime Video users are no more or less likely than average. The top two reasons cited for canceling a video service: people couldn’t find enough content they liked and didn’t find the service good value for their money.

The good news for service providers is that old customers are their best new prospects. They study found that 33% of U.S. and 25% of U.K. cancellers have been persuaded to sign up for service again.

Discounts are a prime opportunity

It is no secret that video streaming is a hyper-competitive market. Another important finding is that discounted subscriptions are an under-exploited opportunity for service providers to win new customers. The survey revealed that a 20% discount for a three-month commitment generated the highest interest level, with 66% of U.S. and 57% of U.K. subscribers saying they were likely or extremely likely to take the offer.

Three months is an important milestone to reach, because subscribers that stay this long are much less likely to leave the service. Surprisingly, the study found that offering more than a 20% discount did not result in more interest.

Free trials not being abused

The study also found that free-trial abuse is not a serious problem for online video service providers. While 49% of U.S. and 62% of U.K. online video subscribers have canceled at least one service within the free trial period, only 5% in the U.S. and 2% in the UK have canceled within the free-trial period four or more times in the last year.

Content is still king

When it comes to retaining existing subscribers, content is king. The study found that 64% of U.S. subscribers and 55% of U.K. subscribers have been with their longest-tenured service for one year or more. When asked why they stay, respondents said having plenty of interesting content to watch was the top reason. Value for money was a close second place, and ease of finding something good to watch came in third. Interesting original content was the fourth reason, while providing plenty of new shows took the fifth-place spot.

Amazon’s expanding influence

Amazon’s expanding influence in the VOD market is evident. The study found that one-third of UK and U.S. Prime Video subscribers have purchased an add-on video service, with higher income individuals more likely to use Amazon Prime Video and to purchase an add-on.

In the U.S., the most popular video add-ons are premium services like HBO, Starz, Showtime, and Cinemax. CBS All Access is also very popular. In the UK, the most popular video add-ons are Eurosport Player, Discovery, ITV Hub+ and FilmBox.

More: nScreenMedia report

Links: Vindicia; nScreenMedia