Video: The Cost of Delivering Low-Quality Video

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Mitch Askenas: Have you really assessed the cost of what it means to deliver low-quality video? Have you assessed the cost to your subscribers, and to your reputation, of what it means when subscribers aren't happy and they complain, either directly to you through a phone call, which has a specific cost, or worse off, what some of the folks have been seeing today is this complaining in public, on Twitter, which is a much bigger reputational hit.

Some of the things that have been noted through all the analytics that are going on today, is users are very, very picky. We don't spend a lot of time waiting for video to load, and if it loads and it's not of the quality we expect for the particular device and the particular location we're standing in, users will abandon that very quickly. These numbers are pretty big numbers. If you look at the abandonment rate, a third of users will abandon the video within a few seconds of it starting, or if it doesn't start, they're out and gone. That may be an event that they paid for, which means they're going to call and complain, or it may just mean that during the trial service, when they're deciding whether they should use your service, they're going to be out and never come back. As you can see, the numbers get worse and worse and worse. 8% of viewers return if they've had a problem, which is not really good if you're an advertising based service. These numbers start to add up quickly. As the problems mount, we don't take very long to lose half of the user base. Five seconds, which isn't a very long time to load a video, the users are gone, and they don't come back.

Now, one of the things that's really important to look at is the churn rate for OTT services. It's much easier to churn out of OTT services than it is out of traditional cable, because there's no set up. You put your credit card in, you don't want it, you cancel it. On average, what's being seen in the industry is about 20% churn rate. 19% from this latest number. Some services are much lower, some services are much higher. It really depends. But there's two reasons that subscribers or viewers churn out of a service. One is the content is not what they're looking to see, it's not interesting to them. Okay, that's nothing that technology can necessarily solve, but the really important number is one third of the users churn out just because the service isn't good. That is something you can control. You're paying a lot of money for your delivery network, you're paying a lot of money for your distribution network, and that is something that should be in your control.

If we look at the economic impact of what that means ... So, if you have a 200,000-subscriber service, and they're paying $10 a month for that service, and you look at the churn rate, or the numbers we just looked at, and you look at a third of the customers churning out just because the service is delivering poorer quality or not meeting their expectations, and you assume a certain number of them call periodically to complain, and that's a well-known number of customer service calls, and the cost to handle a customer service call, at those numbers, the economic loss is quite large. Almost $6 million. That's for a $10 a month service. If you're looking at some of the new MVPDs that are charging $40, $50, $60, $70 a month, you take that up by seven times, you're looking at a huge number of dollars that can be lost if your service quality isn't good. There's no reason it shouldn't be good. You control everything but the last mile. You pay for the CDNs, multiple CDNs, they should be providing you a level of service, there's certainly an SLA, and they should be able to deliver every stream, and every bit rate within the stream, at the level of service that your customers expect.