Abstract

Similarly to other North-American markets, new digital services and alternatives to the traditional pay-TV service are proliferating while the Canadian pay-TV industry is witnessing persistent subscriber losses. In an attempt to support changing viewing behaviors, generate more value and protect the subscriber base, pay-TV operators are extending their core TV service using value-added services (VAS). However, whether or not VAS successfully contributes to reducing subscriber attrition is unknown for academics and operators alike. Using survival analysis, the research examines VAS usage and churn behaviors for 11 647 pay-TV customers over a 12-month period. The results show that VAS users are not systematically less likely to churn and their churn behavior largely depends on usage frequency and usage patterns. Customers with constant or increasing usage frequency are less likely to churn than non VAS users and heaviest users appear to exhibit the greatest level of risk. Results also show that beneficial effects of VAS are generated by free services while payable VAS actually increases customers’ risk. These findings show that churn prediction models need to look beyond the core service and examine actual behavioral usage statistics for both the core service and value-added services. From a managerial perspective, the results confirm that service extensions do indeed generate value and operators can further reduce customer attrition by maximizing VAS adoption. However, the results also show operators need to maintain and stimulate usage to preserve the beneficial effect of VAS and better understand the drivers that increase service switching behaviors.