7 OTT Subscription Metrics That Could Make Or Break Your Business

Truly effective business decisions are driven by insights and a deep understanding of consumer behaviour. It can be hard to draw the right inference from a huge gamut of analytic data. So, to make your life easier, we’ve put together a list of 7 subscription metrics that you must always keep an eye on. These will enhance your understanding of how your OTT business is running and what you can do to take it to the next level.

1. Subscriber Churn –

Starting with the most obvious one. Subscriber churn is calculated using the following formula –

subscriber churn formula

Considering how many options are available to the discerning customer these days, there is going to be a standard level of churn in the subscriber numbers. The thing to keep an eye on is if the overall cancellation rate is stable or fluctuating. And if it is the latter, who are the customers joining or leaving and what their content choices are. OTT churn management can be imperative to meeting your top-line revenue targets.

2. Subscriber Acquisition Cost –

An increasing rate of churn is not necessarily a bad thing, as long as you have a handle on the acquisition cost per customer.

The subscriber acquisition cost is calculated as

subscriber acquisition cost formula

In a cluttered environment, everyone has to spend more to capture the attention of the audience. The thing to plan for is how one reduces the overall acquisition cost & ensure that the lifetime value of each subscriber is a multiple of the amount spent on acquiring them. If there aren’t enough budgets to throw in freebies for new sign-ups, consider expanding marketing efforts. Test out new outreach methods and check what boosts your OTT subscription billing.

3. Monthly Recurring Revenue (MRR) –

This figure can give you a view into the profit potential of the business short-term and is a very important indicator of the long-term health of the business.

As long as the MRR is increasing over time the business is going in the right direction. But a flatline might indicate that there maybe be holes that need to be plugged. The indicators of these issues can be found by looking at where the most MRR is coming from, which customer is spending and what content segments are working. Furthermore, one can look at where is the most MRR being lost.

4. Average Revenue Per User (ARPU) –

In subscription-based billing, the ARPU is another effective indicator of the health of the subscriber base. The Average Revenue Per User is calculated using the following formula –

arpu formula

This can be a way to measure what promotions are working and if there are upselling mechanics in place that are driving significant results. It can also help segment the customers for targeted marketing campaigns.

5. Subscriber Lifecycle –

Once you’ve got someone to subscribe, the next most important thing to look at is what does the customer’s lifecycle on the platform look like. Is it seasonal? Does it change across plans? One of the things this will help you do is identify points of churn and address them. The other is it will help refine your messaging because you should not be talking to a one-month-old customer and a ten-month-old customer in the same manner.

6. Subscriber Lifetime Value (LTV) –

The lifetime value or LTV from a subscriber is an estimate of the value earned from an average subscriber over the time that they stay on the platform.

The LTV is calculated by

ltv formula

This metric is extremely important as it can dictate what the cost of acquisition for each customer should look like. It can dictate key decisions around sales and marketing spends and answer the imperative question of how to get new customers while still maintaining profitability.

7. Subscriber Return on Investment (ROI)

From a business profitability point of view, the ROI is the most essential health indicator for the business. This metric can be measured by the following formula

subscriber roi formula

The ROI can give you a very clear picture of the growth potential of the business and its long-term viability. If the return on investment is high then the platform can look at investing in new marketing initiatives and more variety of content. This in turn can fuel newer user acquisition.

Magnaquest’s Subscription Management and Billing system will not just provide you with the above metrics but also additional vital information such as customer demographic, packages/content ordered, tickets raised, service breakdowns, customer satisfaction, etc. While there may be other significant KPIs that can be looked into, the above-mentioned analytics makes for a solid bedrock for measuring success and future potential.

Magnaquest can also bring together all of these data points along with the data from a viewer measurement system and equip you with a dashboard that gives you a birds-eye view into the health of the business. This will ensure that your target optimally, retain high-value subscribers and also course-correct quickly if required.

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  • Sharath Pothuganti

    Sharath makes his 12 years of experience in the IT field, deep technical expertise, engineering knowledge and team management experience, count in delivering customer-tailored solutions. His business expertise includes identification of customer needs, partnerships and provisioning of solution architecture. As part of the product marketing team Sharath’s focus is on OTT business development and shaping Magnaquest’s software product, Sure based on market need.