Netflix has by far the most loyal subscribers of its competitors, according to new research by Parks Associates.
Analysts found that Netflix subscribers were much less likely to cancel than those of Hulu or Amazon Prime Video. Netflix has now captured 52% of US broadband households, and in the last year, only 9% of its subscriber base has canceled, Parks Associates found.
Contrast this with Hulu (14% of US broadband households), which saw a full half of its current subscriber base cancel in the last year. That’s a lot of turnover for a service that is still growing.
Why does Hulu have such high churn?
One reason could be that people are loyal to content, Michael Callahan, who used to be in charge of customer service at Hulu, told Business Insider in December. Callahan says the surest way to keep viewers is to create blockbuster original shows — the kind they just can’t live without. This is one reason Netflix, Amazon, and Hulu are all pouring money into originals.
Hulu recently released its marquee show “The Path,” which stars Aaron Paul in his first TV show since “Breaking Bad.” The critical reception has so far been positive, and the show has a 82% rating on Rotten Tomatoes.
Lisa Holme, Hulu’s head of content acquisitions, told Business Insider that the company thinks of originals as “brand-defining” shows, whereas licensed shows are what keeps the subscribers entertained on a day-to-day basis. Both are critical to Hulu’s success, she said.
Netflix, for its part, has been spending aggressively on original content in 2016, and Netflix executives have characterised it as the best investment for the company moving forward. Netflix will release 600 hours of original content this year, including 31 original shows.
The other big service Parks Associates looked was Amazon Prime Video, which is bundled in with other services like free two-day shipping under the “Amazon Prime” umbrella. This makes it an imperfect comparison, but Prime Video has snagged 24% of households, with 19% of that base having canceled in the last year, according to Parks Associates.
Here is a chart of the data:
Netflix’s ability to retain subscribers in the US will be a key going forward, as many analysts have predicted further slowdown in subscriber growth in the US, at the market becomes saturated. Netflix missed Wall Street estimates for US subscriber growth last quarter, though it greatly exceeded estimates internationally.
One potential concern for Netflix’s retention is a price hike that will begin in May. 17 million or more people will see their prices go up (by $2 or $1) over the coming months, according to estimates by UBS. And while many people claim they will cancel because of it (15% of those surveyed by JPMorgan), only 3%-4% actually will, according to UBS.
Netflix reports its earnings on Monday, April 18.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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