Netflix Seemingly Bulletproof on Churn, HBO Max and Discovery+ Struggle to Hold Subscribers

Success in the streaming world depends on two factors: acquiring customers and keeping them. Any service might offer up a tempting free trial, but will those users stick around when the bill is due? Recent research suggests Netflix stands alone in its powers of retention.

Wurl Analytics looked at the “churn” rate of subscribers to the major streaming services in April. That number reflects how many existing subscribers decided not to renew. While most services churned 4-5% of their subscribers that month, Netflix only churned 2%.

What accounts for the 7% churn from discovery+ and ViacomCBS properties (Showtime, Paramount+)? It’s possible that churn was far higher on a global level - the Netflix estimate is just domestic, but there may be something else at play.

Discovery+ launched in January, so it’s possible early subscribers had seen enough by April. Paramount+ launched with a free month trial in March, so those users may have chosen to opt out after sampling the service. Paramount+ has been particularly snake-bit, since the studio continues bumping its big-screen franchise releases in response to the pandemic.

This is the second time we've seen Netflix churn holding lower than their competitors. You could chalk that up to their strong library of original content - 83% of Netflix's shows and movies are only available on the platform. The same month this data was collected, 39% of Americans surveyed said that Netflix offers the best original content - tops in the industry.

Netflix may also benefit from being the first major streaming service. While users may feel fine cutting a pandemic fling, it may be unthinkable to axe Netflix because it’s been around so long. This data seems to suggest users are looking for services to add in addition to Netflix, rather than considering Netflix among all the others for the chopping block when money gets tight.

Netflix has faced headwinds lately. The service lost 400,000 subscribers in North America in Q2. Increased competition is taking a toll on momentum, but it is still the clear leader in global subscriptions. Netflix stock is up 15.1% over the past 15 sessions - its best performance over that span since the same time last year.

We might expect the unusual strength of Netflix boils down to its relentless firehose of content aimed at every segment of the audience. You have documentaries, science fiction, kids’ content, action, gore, nudity, prestige TV, Oscar-winning movies, and reality trash all in one spot. There is a significant amount of very bad TV on Netflix, but those titles tend to fade from view quickly. If Disney+ botched the execution on a Star Wars or Marvel property, the stakes are much higher because of the deliberate release schedule.

The non-Netflix services are more deliberate about their content niche. Disney+ caters to kids and families, Hulu has a smaller catalog and is aimed at adults, discovery+ caters to the DIY and reality TV crowd, HBO Max wants you to soak up slow-burn character studies and big-screen blockbusters.

Unlike the other services, Netflix also doesn’t have to share their original content with the big screen or a TV channel. These other companies are trying to back their original business model into the streaming model. Netflix is inherently streaming-native.

Yes, the momentum of Netflix has taken a hit. But it can afford to take a breather while it reloads for the next innovation, whether that’s virtual reality, gaming, or something else. If you’re running a competing service, you’re playing a different game: spending more on acquisition and trying to hit the next streaming home run. Even if Netflix hits a thousand singles and doubles, it can maintain its lead for years.