How Netflix has fared as competition heats up
As featured in Business Insider on April 13, 2020.
As Netflix surpassed 60 million subscribers in the US in 2019 — and its growth rate slowed, and even went negative — many analysts speculated on what the future held for Netflix in the face of increased competition such as Disney+, which launched in November 2019.
We decided to check on some early indicators to see what has transpired over the past few months.
Netflix Churn Rate over time
Netflix Churn increased since early 2018: Netflix’s Churn Rate doubled between January 2018 and December 2019. This trend was likely driven by a number of factors:
- December 2018: Netflix stopped allowing payments via iTunes / App Store, which may have led to increased friction and lower winback (users who cancelled and later returned) for users who had been making payments via iTunes. Of course, this cost was in return for the benefit to Netflix of no revenue share with a third party distributor.
- January 2019: Netflix announced price increases across all of their plans.
- November 2019: Disney+ and Apple TV+ both launched.
Netflix Churn Rate for those who also Signed Up to Disney+
Netflix managed Churn in Q1'20: In Q1'20, Netflix has seen a reduction in Churn Rate. We believe there are at least two reasons for this positive trend for Netflix.
- First, much has been made about the increased Streaming behavior as a result of COVID-19. Netflix was a beneficiary, as more people stayed at home and there were fewer available substitutes, with the postponement of all major sports & entertainment events.
- Second, while Netflix saw a meaningful impact on its Churn Rate, amongst those Subscribers who also Signed Up to Disney+ in November 2019 (Disney+ launch month), Netflix Churn Rate for that group of users has since come down.
The takeaway: For now, Netflix seems to be retaining its US subscribers well amidst the headwinds of increased competitors and tailwinds that COVID-19 has created. Netflix seems to be absorbing the shock of a major competitor launch as Subscribers are treating Netflix like a staple vs. a discretionary item.
