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Making money with online video services is challenging at the best of times. Here are three pitfalls operators often fall into that can be easily avoided.
Content providers tightly control their product’s windowing strategy to optimize revenue. For example, sometimes they decide to release a new film or movie in one region, and hold it back from another. According to Mr. Hoffman this is teaching the biggest fans of the content to steal it rather than wait. He says it is much better to make it available earlier, at a hefty premium. For many of the most ardent fans of shows like Sherlock, they could be prepared to pay 3 times as much as the regular price to get early access.
It is well known that Visa and Mastercard take a small percentage of any sale made on their cards. This charge is usually built in to any SVOD or transactional video service. However, what is often overlooked is the costs associated with charge-backs, when a customer requests a refund. According to Mr. Hoffman, charge-backs occur for up to 0.8% of transactions. Unfortunately, the card issuers assess a fee for a refund that can be as much as the original charge. In some cases a charge-back can cost a service 3 or 4 customer-months of revenue. In this case, service providers should consider charging a higher amount less frequently.
Many people in SVOD marketing are judged on subscriber retention, as well as acquisition. This can lead to companies making it hard for people to cancel. However, this is counter-productive in the web world, as people are reluctant to sign-up for a service with a long subscription term. Instead, Mr. Hoffman recommends a provider should make it easy to cancel, but make sure to poll subscribers on their reason for leaving. That list can become a great tool to re-acquire them later. For example, if someone cancelled because the service didn’t have the latest season of show, when it arrives in the service let them know.
Chapter 1: Don’t train your customers to steal your content (0:40)
Chapter 2: The minimum transaction charge you should never go below (1:40)
Chapter 3: Making it hard for customers to cancel out of fear(3:55)