subscriber management - csi magazine€¦ · asia, the customer acquisition and retention issues...

THE DRIVING FORCE BEHIND PAY-TV PROFITABILITY

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Subscriber managementThe driving force behind pay-TV profitability

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The pay-TV industry is finding new ways to serve the 1.5 billion digital TV homes and grab a share of a market estimated to be worth $400 billion by 2020. Yet, with intense competition and higher expectation from subscribers, many operators are struggling with how to monetise the opportunity.

The television market is rapidly changing and with the increased adoption of broadband, the dominance of national broadcasters is subsiding and the number of new entrants is rising. More low cost streaming and VOD services are coming to market, bypassing regulatory hurdles and making their mark on the new TV world. Pay-TV revenues are now overtaking traditional advertiser funded business models and additional drivers such as the transition to digital terrestrial television and new mobile viewing trends means that as the TV industry continues to change, broadcasters and multi-service-operators are exploring new ways to win, retain and grow subscriber revenues to increase profitability.

In a market awash with competition, subscribers are actively responding to what is perceived as poor service, high cost or lack of content. Leading operators talk about churn levels of 10% per annum or less but, in some markets today, such as in Asia or South America for example, it is common to hear of figures closer to 2-3% every month (i.e. 20-30% or more annually). In the Internet age of instant accessibility, operators are faced with some hard choices and are all asking the same question:

What can pay-TV operators do to increase profitability?

Introduction

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In 2008, a tipping point was reached as subscription revenues overtook advertising and this disparity will continue to increase. By 2020, global pay-TV revenues, including subscription fees and Video on Demand, are predicted to reach $207 billion . With TV advertising revenues dramatically reduced in part by the rise of Internet and social media advertising spend, within a decade, 65% of TV industry revenues may well come directly from subscribers.

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 content owners are increasingly forgoing exclusive licensing agreements to garner a wider global audience. In a future where content is universally available from multiple operators in each country, the pay-TV industry needs to become smarter at other core areas that can help drive profitability.

The power behind subscriber managementContent quality, monthly subscription price and delivery methods are key factors in creating a compelling subscription TV package and these elements can be enhanced through a better understanding of current and potential subscribers. Taking Sky, a brand that has leadership in Satellite pay-TV in the UK and majority stakes in larger equivalents in Germany, Italy and several ventures in Asia, the customer acquisition and retention issues are significant.

Building a profitable pay-TV operation

$207BILLION BY 2020global pay-TV revenues, including

subscription fees and Video on Demand


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For Sky in the UK, which has an average pay-TV ARPU of approximately £400, the company 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. With just over 10 million subscribers in the UK, and a churn rate of approximately 10%, Sky needs to sign up around a million subscribers each year to keep growing. Yet, the company has managed to win customers year on year, boasting the highest customer growth and lowest churn for 11 years.

Alongside its highly regarded content acquisition strategy, the broadcaster is a vocal advocate for the use of a proactive subscriber management approach and processes of which the benefits 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

10%CHURN RATESky needs to sign up around a million

subscribers each year to keep growing


When deployed effectively, proactive subscriber management can help improve the key performance indicators that result in strong growth, lower churn or the ability to break into new markets.

For example, if an operator has 100,000 subscribers paying $10 per month with 25,000 new subscribers joining each year and annual churn of 20%, its annual revenues will equate to $12.15 million in year 1 increasing to just $12.95 million in 5 years – a total of $62.96 million over the 5 year period. However, if an operator was to improve acquisition by just 5% and reduce churn by the same 5% through effective marketing to their subscriber base, then the equivalent revenues are $12.56 million in year 1 growing to $15.84 million in year 5 – a total of $71.65 million (see Figure 1).

Figure 1. Annual revenue showing impact of 5% improvement in acquisition and churn rate

Small changes lead to dramatic increases in profitability

Year 1 Year 2 Year 3 Year 4 Year 5

$12m

$12m

$12m

$16m

$20m


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The key point here is that 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 slightly increasing acquisition by 5% and reducing churn by 5%, equates in our 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:

Increase acquisition “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.

Increase ARPU “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.

Reduce Churn “Keep customers longer”Pro-active 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 that include analysis of usage and bundle tailoring to help generate loyalty are strategies that can reduce churn.


Although all three KPIs are important, as markets become more competitive, reducing churn is absolutely vital to deliver a profitable and sustainable pay-TV business. The reasons for subscribers churning vary, but a recent survey from PwC suggests that roughly 1 in 3 subscribers is at risk of switching pay-TV service provider. Yet, successful operators are using subscriber management technologies to mitigate the causes and improve longer term profitability.

A closer look at churn reduction through subscription management

31%REDUCE COSTSubscriber believes they can get the

same services for a lower price.

22%BETTER BUNDLESSubscriber feels another multi-play

offering (TV, Phone, broadband) is more

beneficial.

Total service cost is made up of customer acquisition costs (CAC), content acquisition and service delivery and support. Proactive subscriber management can help reduce headline subscription costs in the following ways:

Subscriber analytics tools can help identify most profitable types of subscribers allowing better targeting of marketing campaigns

Analysis of current subscribers’ demographics versus content usage can help buyers negotiate better content acquisitions deals

Subscriber management supports streamlined workflow to reduce cost and complexity during the on boarding of new customers to reduce CAC

Subscriber management systems can span multiple products within a bundle to help build a wider variety of bundles through analysis of customer usage:

The ability to create flexible a-la carte bundles through integration with self-service portals

Third party provider integration to allow “single play” TV service providers to share joint customers with other service providers for “virtual” bundles

Proactive targeting of high risk subscribers who are not using the full features of bundles to suggest alternatives to avoid losing subscriber


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18%BETTER SERVICEThe subscriber believes another

provider offers a better service.

16%POOR CUSTOMER SERVICESIncluding a single bad event (2%),

ongoing issues (6%), poor service quality

(8%).

13%OTHER FACTORS

Although heavily based on marketing and competitive landscape, subscriber management can help in several ways:

Automated surveying functions to identify areas of satisfaction and dissatisfaction to help with better service delivery

Customer profiling and surveys to generate metrics to highlight customer satisfaction

Pinpoint trends across customer interaction with service desk to find recurring issues for better targeting of internal resources

Managing customer integration is a particularly strong point for subscriber management solutions across the following areas:

Single relationship management interface and database to handle cases as they progress across departments such as installation, billing, faults and complaints

Improved self-service tools for common subscriber tasks; for example password resets, billing changes, bundle upgrades and PPV signups. Self-service reduces call centre workloads and delivers faster issues resolutions

Analytics to initiate proactive outreach following broadcast service issue to offer subscribers loyalty bonuses and compensation awards

Wider range of flexible payment options including direct debit, credit card, mobile payment, vouchers and online

Many other factors fall into this category such as moving home, emigrating and household changes such as kids leaving home. However, subscriber management has the ability to capture exceptions such as the ones above and route them to follow-up tasks such as:

Re-join us offers within automated mailing lists Seasonal breaks, for example, for sports packages during the

off-season Family plans offering for home leavers with shorter contract

terms Referral to OTT overseas partners


This short guide has touched on many of the core benefits of subscriber management technologies. Around the world, pay-TV operators are growing their traditional and multiscreen TV businesses by partnering with Paywizard. Our easy to deploy SaaS platform combines with our expert services to increase subscriber acquisition, retention, up-sell and cross-sell.

Paywizard builds your pay-TV revenues so you can achieve profitable growth. With our marketing suite you can quickly launch targeted campaigns to attract new subscribers, increase customer lifetime value and ARPU while decreasing churn. With 17 years’ experience of driving pay-TV revenues for our clients, we are at the heart of the TV revolution. Paywizard puts the profit into pay-TV.

Over 17 years’ experience in providing subscriber management and billing for pay-TV operators

Invested more than $30 million in our technology platform Billed in excess of $1.9 billion Transacted more than 100 million on-demand buys to date Acquired more than 10 million subscribers to date More than 1.5 million credit card and direct debit transactions on

average per month Scaled to acquire more than 50,000 new subscribers per day Supporting 300 payment methods in 100 currencies worldwide Fully PCI DSS and FCA compliant

Paywizard can help


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subscriber management - csi magazine€¦ · asia, the customer acquisition and retention issues...

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