The phrase “content is king” mantra may not be new, but it’s still true.
Over the last decade, we’ve witnessed many new types of content emerge. From video streaming platforms, live streaming events, and interactive storytelling pieces to short-form video content, podcasts, e-sports, mobile-first content, and virtual and augmented reality, the content options seem endless.
This is especially true for video streaming services, with the notorious “streaming wars” still raging across the globe (and in our ads). The number of people paying for at least one video streaming platform is always on the rise, with the 2020 pandemic acting as a catalyst driving this trend even further.
But what happens when the number of content kings (or types of kings) is downright overwhelming?
For example, Netflix generated $24.9 billion in revenue in 2020 alone, which is a 23.8% increase compared to 2019. The brand also had an operating profit of $4.5 billion in 2020, which is a 73% year-over-year increase.
What’s the big secret? A personalization strategy. In fact, Netflix has been one of the first to adopt a mass scale personalization strategy using AI technology.
Video streaming is replacing legacy media platforms
Traditional TV is fading as more people of all ages are subscribing to paid video streaming services. According to a Deloitte Insights October 2020 survey on digital media trends, 76% of US-based users said they subscribe to at least one paid service, which is a 21% bump since 2018. This trend of numerous users cutting the legacy cord and subscribing to paid video streaming services is an ongoing process that may, in the long run, completely phase out regular TV subscriptions.
On the other hand, entertainment companies need to find a way to adapt to these changes, as merely launching a streaming service is only the first step.
On top of this, the modern stream-based entertainment landscape is extremely dynamic. The target audiences are evolving and becoming picky and demanding. With their gamut of options widening with every new streaming service, it is becoming quite challenging to engage, acquire, and keep users for longer periods of time.
Why video streaming services are experiencing a greater churn rate
The COVID-19 pandemic fueled the trend of people using multiple video streaming platforms. At the same time, people are leaving streaming providers more frequently.
Between January and October 2020, the number of surveyed users who reported leaving a video streaming platform rose from two to almost five out of 10. During the same year, 23% of surveyed users reported they had started using a new streaming video service, with only 9% of them both adding and leaving a video streaming services since the start of the pandemic.
These numbers suggest that the video streaming landscape is becoming more dynamic, mature, and competitive. For example, more than half of consumers who left at least one streaming service since the pandemic started said that they only subscribed to watch a specific show and then left once they finished the show.
This trend puts video streaming services in a tough position as they have a narrow time frame to keep those consumers as long-term subscribers.
Are consumers winning the streaming wars?
If we consider that video streaming platforms are losing money during the initial months unless the subscriber stays long enough, it becomes obvious that consumers are actually winning the streaming wars.
For example, Deloitte gave us a ballpark estimate in terms of user acquisition costs after analyzing the most popular video streaming services, and the numbers show that providers burn up to US$200 per year to acquire a single subscriber. This means service providers must keep new subscribers for an average of 15 months — depending on the subscription cost — to retrieve those investments.
As the consumers are now in control — enjoying the content at affordable rates and can leave whenever they wish — it is up to the service providers to invest in their retention.
To reduce churn, platforms must be able to quickly learn as much as possible about their new users so they can curate better content for them and predict who churn candidates are before they cut their service.
Personalization strategies take center stage
The best way to attract and keep more subscribers is to utilize personalization. The user needs to be able to separate the signal from the noise. In an oversaturated video streaming space, users need trusted filters that can provide personal recommendations based on their unique tastes.
One way they can achieve this is through recommendation engines based on AI and machine learning (ML) that improve the customer experience.
These systems are helping content providers win over users, build their trust, and retain them through a personalization strategy. The user needs to constantly receive the content they need and want, even though their tastes tend to change over time. For example, over 80% of the content users watch on Netflix gets discovered through the platform’s AI- and ML-based recommendation system.
Here are some of the benefits that an AI- and ML-powered video content personalization strategy can bring to modern entertainment OTT platforms:
Increased content consumption—Based on content consumption data, platforms can curate highly relevant content to each individual and therefore improve overall engagement and content consumption.
Improved new content discovery—Subscribers can easily find the latest content that’s tailored to their own unique preferences. With digital audiences low on browsing patience, it’s up to the streaming service to recommend interesting and relevant titles as quickly as possible. For example, it takes 60 to 90 seconds for a viewer to decide which show or movie they’ll watch. If the consumer doesn’t find content that satisfies their preferences, the chances for churn spike.
Enhanced binge-streaming functionality—To increase revenue, platforms must encourage users to spend more time streaming content. Personalization and recommendation engines help services suggest their most binge-worthy content to users.
Highly personalized advertising and ad placement—Streaming services can use AI and ML to personalize pre-roll, mid-roll, and post-roll ad placements and, therefore, increase ad revenue through better targeting.
Improved marketing communication—Subscribers can opt to receive personalized marketing emails and push notifications that include content recommendations they are likely to engage with.
Paving the future of live streaming
Streaming video providers have golden opportunities to come up with the best strategies for building trust with their audience and making them stick around.
HTEC is spearheading several entertainment and streaming TV platform projects that provide end customers with unique personalized services.
Our solutions allow viewers to jump between devices, access features and content more easily, and create groups where they can interact and communicate with other users.
Audiences are hungry for new forms of entertainment and their needs are changing all the time. How can streaming video services combine the latest technologies, great content, and a personalization strategy to keep their subscribers long-term?
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