Maximizing value for video streaming services (2024)

Maximizing value for video streaming services (1)

11 minute read 03 Feb 2023

A customer value management approach helps video streaming services turn their customer data into better business performance.

In brief

Customer retention is critical to streaming service profitability, as providers face market saturation and rising customer acquisition costs.
A data-driven, personalized approach to customer value management helps organizations acquire subscribers profitably and keep them engaged.

Americans today watch more TV from streaming services than either cable orbroadcast,^[1]with nearly 88% of U.S. households^[2]using video streaming services and the average streaming household now “stacking” five subscriptions.^[3]Platforms’ focus on subscriber growth, however, did not automatically drive profitability. Instead, major media and entertainment companies in the video streaming space have cumulatively lost billions of dollars in the last year.

Platforms face continued headwinds for subscriber churn: consumers are rationalizing their choices, particularly in an economic downturn, and competition among platforms for subscriber attention and loyalty has never been fiercer. Among video streaming subscribers, 66% report canceling a service in the past year.^[4]In this challenging environment, it’s clear that video streaming has shifted from an acquisition-at-any-cost race to a user engagement and retention-driven competition.

“Customer centricity can help streaming players achieve profitability by shifting focus from acquisition to maximizing customer lifetime value,” says John Harrison, EY Americas Media & Entertainment Sector Leader.

Video streaming services can increase customer lifetime value through customer centricity. The value is recognizable — and attainable — when video services see customers through a customer value management lens.

Customer value management (CVM) can help companies accelerate growth, reduce customer churn, and improve profitability in the short- and mid-term through three solutions:

More efficient subscriber acquisition
Expanded engagement from existing customers
Lower churn through proactive customer retention

Customer centricity can help streaming players achieve profitability by shifting focus from acquisition to maximizing customer lifetime value.

John Harrison

EY Americas Media & Entertainment Sector Leader

Customer value management drives profitability and sustainable growth

The graphic shows three approaches to customer value management and their impact on profitability.
Targeted acquisition, or the right customer at the right cost, focuses on right-sizing customer-acquisition costs.
Increased viewership and engagement through personalization increases customer lifetime value (CLV) by increasing viewership.
Proactive retention tactics to predict and mitigate churn increase CLV and reduce churn through targeted retention.

Chapter 1

Customer value management and personalization drives engagement

By incorporating CVM, companies can adjust quickly to emerging trends and consumer habits.

For video streaming services intent on increasing profitability and achieving sustainable growth, it’s important to focus on increasing customer lifetime value (CLV). Companies can recalibrate accordingly by incorporating customer value management and personalization at scale into their growth strategy.

Customer value management: value what your customers value

Customer value management is a customer-centric approach to creating sustainable value. Leveraging personalization at scale, CVM harnesses customer data across channels and properties to proactively identify the key value propositions that drive customer lifetime value (CLV) and average revenue per user (ARPU). With a nimble, test-and-learn CVM approach, companies can identify high-value customer segments and better capitalize on emerging trends and consumer habits.

“Personalization at scale enables you to create the right human connection at every stage of the funnel, but it must be enabled by consolidated consumer data, which most media companies have not actually prioritized,” says Janet Balis, CMO Practice Leader and Partner, Ernst & Young LLP.

Personalization at scale creates the right human connection at every stage of the funnel, but it’s only enabled by consolidated consumer data, which most media companies have not prioritized.

Janet Balis

CMO Practice Leader and Partner, Ernst & Young LLP

Personalization at scale: it’s all about them

Personalization at scale enables CVM’s customer-centric approach by delivering the right content at the right time, via the right touchpoint, to the right customer.

This personalization is achieved through technology that harnesses the power of audience insights, content strategy and channel targeting to deliver real-time next best actions for important customer touchpoints. Increasing personalized relevancy and stimulating engagement can result in lower customer churn, growth in ARPU and incremental gains in customer lifetime value across the entire customer journey.

Unlock personalization at scale with tech and customer data

A segmented pyramid graphic shows the relationships between audience data, channels, content and customer data, and technology platforms to deliver a personalized experience for users. This approach increases customer lifetime value through delivering the right message at the right time and place.

Chapter 2

The customer engagement lifecycle: turn on, tune in and take note

Acquisition, engagement and retention are three levers of an effective CVM strategy.

A successful CVM strategy and execution can help service providers achieve profitable growth through three levers:targeted acquisition, expanded engagement, and proactive retention.

Subscriber engagement lifecycle

The graphic shows how a customer value management (CVM) approach can drive growth at each stage by running data-driven actions from acquisition to lifetime value across the subscriber engagement lifecycle.
Targeted customer acquisition: What gets the right customers to us?
Right data
Audience-building strategies
Clear value proposition
Content-rich creative
Easy-to-understand pricing
Appealing offers and bundles
Frictionless buying
Strategic distribution partnerships
Expanded engagement: What enables us to engage customers?
Seamless customer onboarding
Personalized customer experience
Content recommendation campaigns
Upsell/cross-sell
Campaigns engaging inactive/low-usage customers
Proactive retention: What keeps customers with us and reduces churn?
Frictionless renewal
Best-in-class CX
Customer service
Predictive churn scoring
Loyalty programs
Customer advocacy incentives
Retention promotions (proactive and reactive)

Lever 1: Get the right customers, not just customers right now

Media and entertainment companies and streaming providers have a wealth of customer data that is often severely underutilized today. Given consolidation across the industry, the collective signals across most media companies can enable powerful insights about customer attitudes, lifestyle, content consumption and preferences (even while remaining privacy compliant). First-party customer data provides insights into the most valuable audience clusters that can be deliberately targeted to drive conversion.

The audience data is out there, use it to bring customers in

To effectively build audience and marketing strategies, it is critical to harness available first-party data and enhance it with second-party data via partnerships. Data enables deep insights not only for which media spend drives conversion for targeted customers, but also which programming will resonate, which is particularly important given that tune-in or conversion is often driven by specific programming. By utilizing audience data, streaming companies can better understand how subscribers are consuming their content and adjust their offerings accordingly to appeal to high-value audience clusters. Consumers are increasingly willing to provide their personal data to brands and companies in exchange for added value. According to 55% of US consumers, customers would provide their data in exchange for a completely custom online experience.^[5]

To supplement this targeted media strategy, companies must also use a CVM approach to strategically engage distribution partners that attract high-value audiences. Platforms can also use CVM to test and tailor the pricing, packages and introductory promotions they offer and measure how these levers impact CLV relative to customer acquisition cost.

A media company wanted support launching a revolutionary new sports streaming service from the ground up, driving subscriptions and re-engagement with a data-driven advertising strategy, and optimizing campaign performance with clearer attribution and better targeting. This personalized approach helped the new platform grow its paying subscriber base by ~400,000 in less than one year and attract engaged subscribers who watch ~6 hours weekly and 4 to 5 sports monthly on average.
A US provider of consumer cable television, internet and wireless services wanted to drive growth of a US$100 million business unit. The EY team worked together with the business unit to test and implement more granular and targeted acquisitions campaigns, which drove record high sales (+15%) while maintaining the same marketing acquisition budget.

Lever 2: The more personalized their experience, the more customers are engaged

Streaming platforms face intense competition for customer attention and share of wallet. The top reason subscribers cite for cancellation is lack of use (37%).^[6] To reduce customer churn, streaming companies can more effectively compete for screen time and stimulate usage – and by extension, customer “stickiness” and perceived value of their service – through personalization at scale.

CVM plays a critical role in driving usage and engagement by improving the users’ experience through personalized offers, communications, experiences, and content recommendations that cater to their specific needs.

Personalizing their experience every (digital) step of the way

According toEY’s 2022 Digital Home Study, 56% of respondents chose “user experience” as one of the top three criteria for selecting a streaming service.^[7]

Personalization goes beyond simply personalizing the content of the user’s experience. True personalization spans the customer journey, including a seamless onboarding experience and customer care that meets customer needs. It also extends to catering the frequency, timing and method of communication to the preferences of the individual customer. Taken together, these optimizations can deliver big payoffs in terms of increased viewership and customer retention.

A professional sports league wanted to improve retention on its mobile app, and user data indicated customers who watched videos on the app were less likely to churn. The league adopted multivariate testing to improve viewer engagement, resulting in a 30% increase in minutes of in-app video on demand (VOD) watched per visit.
A professional basketball franchise teamed up with EY to design and launch a fan engagement platform, personalizing the fan experience. The personalized approach via mobile platform delivered a 50% increase in mobile app merchandise and ticket revenue.

Lever 3: Keep customers from switching the channel

Customer churn has continued to rise, with the active monthly subscriber churn rate of major US streaming services reaching 5.2% at the end of 2021, up from just 3.2% in early 2019.^[8]Reacquiring a subscriber can be costly. Customer acquisition costs can be five or more times higher than the cost of keeping existing customers.^[9]CVM and personalization can be a key part of the solution.

“Effective and industrialized customer value management campaigns enabled by technology are critical for helping media and entertainment companies to grow, win market share and boost profitability through increased customer lifetime value,” says Vincent Douin, Business Consulting Principal, TMT sector at Ernst & Young LLP.

Reacquiring a subscriber can cost five times more than the cost of keeping existing customers.

“Are you still watching?”

Predictive analytics such as churn scoring or propensity modeling are powerful tools that companies can use to proactively identify users who are at risk of discontinuing their service, empowering streaming providers to intervene with custom offers before subscribers terminate their subscription.

For example, personalized communications with content recommendations or proactive suggestions to migrate to an ad-tier or another bundle service can reengage customers and avoid potential cancellations.

A leading European video, broadband and communications provider turned to EY professionals for support building its Customer Analytics Platform. The EY team supported the development of a CLV calculation model and piloted and ran user engagement and retention campaigns in three countries to drive tangible business impacts, including 9% reduction in customer churn and +3% ARPU.

Chapter 3

Hardwire a customer value management approach with data and tech

Four characteristics connect all phases of a campaign, from creation to delivery.

Adopting a best-in-class customer value management approach requires the right tools, technology platforms and operating model across business, data and technology teams. There are four shared characteristics among leading CVM-oriented enterprises.

1. Data shared is value realized

Top-tier data and technology platforms enable real-time subscriber insights and democratize data across the organization. Platforms also support end-to-end customer operations while simultaneously governing data properly and establishing compliance with data privacy and security regulations.

“Unified customer data is the foundation for a successful CVM activation and personalization at scale,” says Denise Colella, Vice President and head of Adobe’s Digital Strategy Group for Media & Financial Services. “A best-in-class data platform consolidates data sources from all relevant sources across the organization to build a rich 360° view of audiences and their customer journeys. Fragmentation equals degradation when it comes to data.”

Holistic 360° view of the customer

Unified customer profile is at the center, and elements feed into it from data lakes and enterprise systems and from marketing automation, technology, CX technology and CRM. Creating the holistic view are front end UX/UI, predictive modeling, performance measurement, data and enterprise system links (IT, technology stacks), and advanced analytics.

2. Intelligent decisioning engine: expand customer journey analytics, measurement and personalization capabilities at scale

Transform unified customer data into subscriber insights that drive value. Data-driven decision engines can power personalization tools to identify next best actions for micro-segments or at the individual level. Predictive analytics tools can leverage real-time data to segment prospects by predictive CLV, anticipate churn (i.e., churn scoring) or optimize content by audience for streaming subscribers.

“Significant strides in artificial intelligence (AI) and machine learning (ML) tools in recent years mean the time is right to turn insight into action through personalization at scale,” says Sam Garfield, Director, Industry Strategy for Media and Entertainment at Adobe.

3. Connect across channels and align workflows to expand personalization

Act on data-driven insights in real time. Delivery and content management tools can help marketing, CX and customer care teams streamline workflows and deliver personalization across channels within milliseconds to engage customers in their timeframe using integrated assets. Content management systems can connect all phases of a campaign, from creation to delivery, into one integrated workflow, facilitating collaboration between creative and marketing, delivering the optimal combination of experience, layout and offers to customers with ease.

Better tech, better data-driven decision-making across the customer lifecycle


	Efficient Acquisition	Expanded Engagement	Proactive Retention
Data	Democratize first-party data across the organization, unify subscriber profiles	Advance programmatic segmentation capabilities	Advance programmatic segmentation capabilities
Decisioning	Optimize cross-channel prospect journeys	Optimize content by audience, uncover problematic customer touchpoints	Flag at-risk subscribers with predictive churn scoring
Delivery	Strengthen activation campaigns for known and unknown customers, eliminate redundant systems	Automate responses to customer behavior with AI, personalize the omnichannel experience	Test and optimize targeted retention campaigns

The right technology will activate data-driven decision-making across the customer lifecycle.
Data: Centralized, comprehensive real-time customer database
Decisioning: Standardized customer journey analytics and measurement
Delivery: Targeted cross-channel campaign generation
Efficient acquisition:
Data: Democratize first-party data across the organization, unify subscriber profiles
Decisioning: Optimize cross-channel prospect journeys
Delivery: Strengthen activation campaigns for known and unknown customers, eliminate redundant systems
Expanded Engagement
Data: Advance programmatic segmentation capabilities
Decisioning: Optimize content by audience, uncover problematic customer touchpoints
Delivery: Automate responses to customer behavior with AI, personalize the omnichannel experience
Proactive retention:
Data: Run targeted campaigns on churned customers using subscriber profiles
Decisioning: Flag at-risk subscribers with predictive churn scoring
Delivery: Test and optimize targeted retention campaigns

4. Operationalize CVM across your organization to enable agility

Accelerate value creation across the organization through iterative testing and interdisciplinary coordination across finance, data and analytics, IT & technology, and business teams. An agile operating model will help an organization centralize CVM, and, by extension, pivot with agility, launch campaigns to market faster, and increase the ROI of digital experiences with content tailored to subscribers.

The iterative customer value management approach begins with assessing. What are the CVM opportunity areas and capabilities that you should prioritize? Next is testing. Which test campaigns can you execute and measure to deliver against customer value? The third step is a roadmap. What is the prioritized list of CVM initiatives that would maximize business outcomes and targets?

Chapter 4

Grow amid greater competition with EY and Adobe

Digital transformation is a must for players in the video-streaming landscape.

Through data-driven customer centricity and personalization at scale, CVM can deliver margin expansion for streaming businesses via targeted acquisition and increase customer lifetime value through enhanced subscriber engagement and predictive churn management.

Consider enlisting partners with deep experience in operating model transformation for media and entertainment enterprises, who can build and implement a roadmap to assemble the ways of working and data and technology tools to achieve a CVM-aligned operating model across your business, data and technology teams.

Be mindful of leading-edge technology solutions that can deliver unified 360° views of audiences, decisioning insights for customer journey analytics and real-time personalization at scale and solutions for creating, managing and connecting the next best content to subscribers and prospects.

In today’s fiercely competitive media entertainment and streaming landscape, this value-driven transformation is essential for your company to prevail and achieve profitable growth.

Author of this article isVincent Douin,Consulting Customer Principal, TMT sector, Ernst & Young LLP (EY).

Contributors to this article wereNikki Hutsell,Manager, Ernst & Young (US) LLP;Madhurika Rao,Senior Manager, Ernst & Young (US) LLP;Fernando Schiantarelli,Senior Consultant, Ernst & Young (US) LLP;Natalie Szogas,Senior Consultant, Ernst & Young (US) LLP;Sam Goren,Senior Consultant, Ernst & Young (US) LLP;Jason Pepe, Senior Consultant, Ernst & Young (US) LLP; andJill Sawyer,Staff,Staff, Ernst & Young (US) LLP.

Streaming claims largest piece of TV viewing pie in July: https://www.nielsen.com/insights/2022/streaming-claims-largest-piece-of-tv-viewing-pie-in-july/
Video streaming market growth stalls in the US: https://www.kantar.com/inspiration/technology/us-video-streaming-market-growth-stalls
Video streaming market growth stalls in the US: https://www.kantar.com/inspiration/technology/us-video-streaming-market-growth-stalls
US Future Consumer Index 11: Five consumer types you need to understand,” Kristina Rogers, EY, November 9, 2022. https://www.ey.com/en_gl/consumer-products-retail/five-types-of-consumer-that-you-need-to-understand
The Value of Keeping the Right Customers: https://hbr.org/2014/10/the-value-of-keeping-the-right-customers

Summary

To succeed in today’s competitive market, video streaming service providers need to put the customer at the center to optimize how they attract, engage and retain users. Leveraging data and technology platforms to personalize subscriber experiences can improve profitability and reduce churn.

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