How Streaming Platforms Can Regain Profitability

Whether it’s true or not that the heyday of streaming has come to its end, there’s no doubt that the industry is in flux, searching for new ways to boost revenues in a less-than-ideal economic climate where the pool of new subscribers is rapidly shrinking. As streaming video on demand (SVOD) companies face saturated markets and a sort of “subscription fatigue”, price wary consumers are asking themselves for the first time since the pandemic, "do I really need all these streaming services?” While companies have cut costs by scaling back on original content production, it’s not generally a winning long-term strategy for retaining customer interest or loyalty. So, what is? We explore one way that streaming platforms can regain profitability… 

The Slow Decline in Customer Satisfaction 

Though it’s true that streaming subscribers are generally satisfied with SVOD providers, there’s a concerning downward trend in the level of satisfaction reported over the past few years. Popular streaming giants have a right to be nervous as mid-tier platforms are starting to bridge the “satisfaction gap”. A customer survey conducted in 2021 showed almost a 30-point lead between high performers and the lowest, but this gap soon narrowed to 14 points in 2023, representing an overall 53% decrease over the last three years.  

This is a stark reminder that no streaming company should get too comfortable. Consumers have elevated expectations, particularly when it comes to media and entertainment, and with the cost of essentials rising, they have become more discerning when it comes to discretionary spending. 

Streaming incumbents can always be supplanted by new entrants or niche platforms that offer a better mix of original and library content, or a better user experience. One of those is Peacock, a platform that still holds one of the lowest spots on the satisfaction index, yet due to the quality of its original content has seen a 6-point increase in the last year, while Disney and Netflix both dropped by 3 points. 

What’s behind customers’ dissatisfaction, or rather their slow disenchantment with streaming providers? The economy for one. The cost-of-living crisis has put the squeeze on American households. Four in ten U.S. adults are now worried they can’t cover the cost of their monthly expenses, with 69% saying they have had to cut back on extras, like entertainment.  

Many add that subscription fees keep rising. With most consumers using multiple platforms, the average subscriber now pays $46 a month for streaming services. This has led to a sort of “subscription fatigue”, where 45% of consumers have canceled at least one streaming service in the past year, citing excessive cost as the reason.  

If consumers are going to remain loyal to their SVOD providers, they want value for money. But content is also a deciding factor, with one survey revealing that 87% subscribed to a platform just to access specific shows or movies. The delivery method also matters. Despite increased competition, Netflix has remained America’s favorite streaming platform for two reasons, its content library and its superior user experience.  

Netflix’s Brilliant Use of Customer Data 

This brings us to a few ways that companies like Netflix have tried to boost lagging revenues. One way is to cut down on original content, which is expensive to produce. But, as we saw from the proceeding surveys, that could cost companies the loyalty of their subscribers. Streaming providers have also cracked down on password sharing and some have introduced higher-priced tiers that exclude advertising, along with lower-priced tiers with ads to appeal to cost-conscious consumers.

While these tactics may increase revenue in the short term, when streaming starts to resemble cable TV in both pricing, inflexible service tiers and advertising frequency, you run the risk of alienating customers who began streaming because it was a different experience from cable (36% already say that streaming content isn’t worth the cost).  

So, what can stop the downward slide in consumer satisfaction and loyalty? Turns out, Netflix may hold the key with its brilliant use of customer data. No other streaming provider has been able to capitalize on the vast amounts of data provided by its over 270 million paid subscribers. Using everything from customer demographics to content preferences, Netflix consistently improves its performance and delivery model, employing artificial intelligence (AI) algorithms that provide content libraries and recommendations personalized to each user.  

It's also constantly refining those algorithms to provide a better customer experience. One example is the transition away from counting the “number of views”, its main engagement metric in 2019, to “minutes watched” in 2021, a move the company said has allowed it to more accurately gauge the popularity of its content. This helps inform everything from Netflix’s content creation to predicting what viewers will want to watch next.  

This focus on data has been so successful, it has allowed the platform to personalize content in extraordinary ways. For instance, Netflix’s content recommendations are so accurate, they have an 80% viewing rate. Which ensures that subscribers enjoy easy access to the personalized content they want or like, a winning formula for customer satisfaction and retention.  

Data is the Pathway to Profitability 

The key takeaway is this - data is the key to a business’ flexibility, adaptability, and ultimately, its profitability, in a shifting landscape where consumer expectations and loyalty are ever in flux. No one should feel “safe” in a climate where consumers are struggling to pay for essentials and any extra spending can be cut.  

Even Netflix has learned this lesson with its slight decline in customer satisfaction over the past three years. Still, one in three U.S. customers are so loyal to the streaming platform that they would never drop the service, even if prices went up– a testament to its strong user design and ingenious use of AI to customize content, giving customers what they want, when they want it.  

The future winners will be those who can use customer data to their full advantage, capitalizing on data-driven insights to constantly refine their service models and to provide the best viewing experience.  

But streaming platforms are not the only source of insight. Contact centers should also be viewed as valuable repositories of consumer feedback, everything from brand perception and likeability to direct consumer feedback on products and services, as well as engagement metrics that can help guide decisions around everything from platform design to CX delivery to content creation.  

Think of the power of combining both your platform user data with your contact center data. Our AI-powered itelligence platform uses sophisticated algorithms and Generative AI to bring you those valuable contact center insights and real-time performance analytics, in a visualized dashboard that makes it easy to connect the dots. It gives you yet another window into the hearts and minds of your customers, as well as a 360-degree view of all your engagement channels, from voice to chat. 

Couple that with reliable, easy-to-access customer support, for instance where subscribers need technical troubleshooting or help with their account, and that is a strong path towards sustained customer loyalty, spending, and long-term profitability.  

When data is fully harnessed, the possibilities are endless. But only if companies are willing to find CX partners that equally understand the critical importance of data analytics and the real-world AI applications that lead to measurable and meaningful outcomes for their business and customers. 

Intrigued? Learn how we use AI analytics to enhance your CX operations.