Tuesday, August 03, 2010

Why The Churn?

Everyone I know loves NetFlix, but as I dig into their financials to understand more, I'm seeing that average churn is about 63% annually.  That means that for every 100 people who subscribe to Netflix, about 63 of them quick annually. 

That's a lot of turn-over.  Yet when you ask people if they like Netflix, the answer is always yes.  The company's standard of service is very high and their investment in online services is leading the industry and bringing along many consumers.

So why the high rate of churn?  Could it be that the content is itself simply not compelling?  Or could it be something else?  HBO's churn is about the same level - and again, while people say they love HBO - the majority of those customers are likely to drop the channel within one year of subscribing.

So what gives?  People don't drop cable. They don't drop satellite, but they do seem to drop premium and movies from their list quite frequently.   The question is why, since the movie business is quite robust and many subscribers seem to return to these services over and over again, only to leave them later on.

Netflix Envelope from Flickr User Rieh

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