Putting the profits into pay-TV

First published: 07-10-2015

Putting the profits into pay-TV
Jonathan Guthrie, CEO and co-founder, Paywizard

With the number of national broadcasters subsiding, an influx of low cost streaming and VOD services hitting the market, and the rise of mobile video changing consumer behaviour, broadcasters and multi-service operators are trying to find new ways to win, retain and grow their subscriber revenues. But today, subscribers expect to be able to watch the TV they want, whenever and wherever they like, which means that they are now actively responding to poor service, high cost or a lack of interesting content.
Benefits of proactive subscriber management include:

•Predictable revenue through greater visibility into subscriber behaviours
•Predictable operational factors
•Analysis of traffic patterns and transaction volumes
•Customer data and insight
•Regular and more effective engagement between brand and subscribers
•Better use of social engagement and marketing opportunities

Benefits of proactive subscriber management include:

So with increasing competition and high subscriber expectations, operators around the world are all asking the same question: What can we do to increase profitability?

Although the saying “content is king” still holds true, content is no longer as proprietary as it once was. High value content such as sports and flagship show formats are still key draws for viewers, but with a future where the same content will be available from multiple operators in each country, the pay-TV industry needs to become smarter at other core areas that can help drive profitability.

This means that content quality, monthly subscription price and delivery methods are key factors in creating a compelling subscription TV package. But these elements can be enhanced further through a better understanding of existing and potential subscribers.

For example, Sky, which has an average pay-TV ARPU of approximately £400, spends roughly £390 in acquiring a new customer on a minimum 12-month contract (this includes the costs associated with set-top boxes, marketing, advertising, service activation, customer call centres and other costs such as discounted introductory offers). And with over 10 million subscribers in the UK and a churn rate of approximately 10%, Sky needs to sign up around a million subscribers a year to keep growing. Yet year on year the company manages to win customers and boasts the highest customer growth and lowest churn rates for 11 years.

So how does Sky do it? Alongside its highly regarded content acquisition strategy, the broadcaster has been a vocal advocate for the use of proactive subscriber management.

When deployed effectively, proactive subscriber management can improve key performance indicators that result in strong growth, lower churn, and most importantly, profitability. For example, if an operator has 100,000 subscribers paying $10 per month, with 25,000 new subscribers joining each year and an annual churn rate of 20%, its annual revenues will equate to $12.15 million in year 1, increasing to just $12.95 million in 5 years – giving a total of $62.96 million over the 5 year period. But if an operator was to improve acquisition by just 5% and reduce churn by the same 5% through effective subscriber marketing, then the operator’s revenues would equate to $12.56 million in year 1 and grow to $15.84 million by year 5 – giving a total of $71.65 million – an increase of almost $9 million through use of proactive subscriber management.

Not only do small improvements to acquisition and churn rates make a significant difference on the bottom line and profitability, but the difference increases massively year on year. Overall, the impact of being able to actively manage your subscriber base, by increasing acquisition by 5% and reducing churn by 5% equates, in this example, to an extra $8.94 million in revenue over 5 years.

Through the use of proactive subscriber management, operators can help to drive profitability in three key ways:

•Add more net new subscribers
Using a subscriber management system effectively can help drive prospect acquisition campaigns, including analysis-based recommendations for targeted advertising. Another effective acquisition strategy is tactical campaigning such as “recommend a friend” or sign-up incentive schemes that can be driven across multiple contact points via subscriber management tools.

•Sell more products and services
Intelligent subscriber management can help to provide context and analysis to help build ARPU increasing activities. For example, targeted loyalty campaigns and upsell/cross-sell opportunities that are particularly useful for MSOs. Another effective tactic is special promotional sales, targeted based on a deeper understanding of the aggregate subscriber base and individual preferences.

•Keep customers longer
Proactive subscriber management has a strong role to play in reducing the inevitable churn by identifying and targeting individual groups of customers when contract terms are due, or pending cancellation. Systems can even aid the retention teams that are needed for outreach to cancelled subscriptions. Proactive measures such as analysis of usage and bundle tailoring to help generate loyalty are strategies that can reduce churn.

As more pay-TV services come to market, broadcasters and operators need to attract subscribers – and keep them. For the past 17 years, Paywizard has been driving pay-TV revenues for its clients with the use of proactive subscriber management. Paywizard understands the TV market, sees the challenges operators face and helps to drive revenue opportunities in the new multiscreen world. Paywizard not only helps to get subscribers on board, it helps improve brand loyalty, and through effective marketing, can drive revenues and profitability, ensuring operators are successful in an increasingly complex TV landscape.

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