Friday, April 15, 2016

Are OTT Video Service Churn Rates High or Low?

How one defines “churn” radically affects one’s calculation of customer churn rates. And Parks Associates counts churn at least two different ways. One method suggests low churn, the other suggests high churn. Take your pick.

By one methodology, which compares churn as a percentage of lost customers across the whole base of U.S. broadband homes, churn rates are low for a consumer service, amounting to annual losses of about 20 percent, or monthly rates of less than two percent.

Using the other methodology, one more common for churn measurements--the percentage of the current subscriber base who drop service in a month or year--OTT video service churn is low for Netflix, relatively low for Amazon Prime and high for Hulu Plus.

In 2015, Netflix lost about nine percent annually; Hulu Plus about 50 percent for the year; Amazon Prime about 19 percent over 12 months.

On a monthly basis, that suggests Netflix churn of about three quarters of one percent a month--quite low for a consumer service of any type. Hulu Plus appears to be about four percent a month, high by consumer service standards.

Amazon Prime is about 1.5 percent a month, acceptably low for a consumer service.

Mature access services, especially mobile and triple play services, can have churn of less than one percent a month, by way of comparison.

Parks Associates' OTT Video Market Tracker shows 33 new OTT services entering the U.S. market in 2015. Among all U.S. broadband households, 64 percent of U.S. broadband households subscribe to an OTT video service, up from 59 percent in 2015.

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