Churn has long been the bane of virtual multichannel video programming distributors (vMVPDs) that don't require long-term contracts and allow subscribers to come and go as they please.

While that's a good thing for consumers who are sick and tired of long-term contracts that typically weigh down more traditional pay-TV services, the flexibility and uncertainty of the no-contract appraoch offer a different set of challenges for vMVPDs.

For Sling TV, a vMVPD that launched way back in February 2015, churn remains a challenge, but one that comes in a range of shapes and sizes. "There's no such thing as a bad customer. There's only bad investment," Michael Schwimmer, EVP and group president of Sling TV, said today at the all-digital StreamTV Show.

Sling TV strives to keep churn in check, but it [churn] "comes in different flavors," Schwimmer explained.

He said it's important for Sling TV to look at customers who churn through multiple lenses – there are those who leave and then come back, and those, particularly families with multiple viewers, who tend to be a bit more loyal and stick with the service longer.

Sling TV, Schwimmer said, has a "robust restart business" that sees customers depart, only to return later. That, he says, helps Sling TV figure out how much to spend (or not spend) to acquire and re-acquire certain customers.

"We think about churn for those customers differently," he said, noting that losing more loyal Sling TV subs is also "more painful" simply because they represent more value to the business.

Churn is pervasive among all streaming services, including no-contract subscription VoD services. Last week, Interpret released a study finding that only 20% of streaming subscribers are content to stay with their current providers, with 13% saying they cancel after watching a selected video series. The fragmentation of content availability among streaming services "is essentially training consumers to be churn-tolerant," Brett Sappington, VP of research at Interpret, said in a statement.

Skinny bundles viewed as a differentiator as other streamers fatten up

Although Sling TV has not been dealt the same level of pain as traditional pay-TV providers, it's been struggling for growth as well as customers shift more attention and dollars to subscription VoD alternatives or bounce from deal to deal and promotion to promotion among vMVPDs. Sling TV lost 100,000 subs in Q1 2021, ending the period with 2.37 million.

But Schwimmer still likes Sling TV's position as a vMVPD focused on skinny bundles. Although Sling TV is not immune to price hikes due to escalating programming costs, many of its streaming competitors have had to go with steeper price increases partly because they have shifted to fat bundles and packaging that, Schwimmer claims, has merely "replicated pay-TV over the Internet."

Many of those competitors entered the fray later than Sling TV, which, he said, has been able to keep packages smaller and prices down through a combination of "discipline and expertise and contracts."

Plus, Sling TV has so far avoided heavy retransmission fees to carry local broadcast networks. "We don't offer locals. We don't want locals," Schwimmer said, noting that Sling TV customers have the option to get those stations over-the-air with a digital antenna and, depending on the market, can access them through Locast, a service that streams local broadcast TV in multiple US markets for free, but encourages viewers to make monthly donations.

Tension brewing with programmers as they pursue DTC models

But Schwimmer also acknowledges that there is "tension" building between distributors and programmers as the latter continues to launch direct-to-consumer (DTC) streaming services that make it easier for consumers to get their content without a pay-TV subscription.

He's also hopeful that emerging streaming services, such as CNN+, or existing ones such as Fox News's Fox Nation, won't completely duplicate what they do for pay-TV.

"I fully expect it will be a complementary product," Schwimmer said of emerging services such as CNN+. He also pointed out that the Fox Nation streaming service has been available for years (it launched in November 2018), yet Fox News' ratings remain relatively solid.

In another example, he noted that NBCU's coverage of the Tokyo Olympics will head to the Peacock streaming service, but that there will be plenty of coverage of the games available on NBCU's more traditional TV properties, such as NBC, CNBC and USA.

And he believes that the linear pay-TV business is still good enough for those programmers to maintain even as they continue to transition to direct-to-consumer models. That old model remains the "proverbial Golden Goose," he said. "I don't think the programmers are all that interested in killing it."

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— Jeff Baumgartner, Senior Editor, Light Reading