Churn & Burn: What Keeps Streamers’ Business Healthy?

This week, Sir Lord Ted Sarandos announced that The Irishman was viewed more than 26 million times in its first week of availability on Netflix.

But what does that exactly mean?

It means that 26 million people watched at least 70% of The Irishman. They watched over 2 and a half hours of the film before (a) finishing it, or (b) deciding that they’d seen enough of the view from the old folks home.

But industry insiders have been ornery with Netflix and their opt-in/opt-out mentality of sharing data of how their films performed on the service. The debate has ranged far and wide; Netflix should announce box office like their competitors, Netflix should announce viewing stats like their network foes, Netflix should be transparent always, versus sometimes. Of course, Amazon joined Netflix and started doing the same thing. Because in reality, there’s strength in your business negotiations with talent if you can keep them from knowing how bad or good their last project performed.

But that’s not the story. The story here is about churn.

Churn is a term that any subscription service (Apple Music, Spotify, Netflix, Hulu, Amazon Prime) uses to define what percentage of paying users stop paying in any given month. Did x number of subscribers join HBO last month to start watching the Watchmen and the Silicon Valley season finale, only to cancel (or churn out) this month when all those shows end? Are there folks joining Apple Music with a 3 month trial subscription, then churning out and deciding not to pay for the monthly service once they’ve sat at the all-you-can-eat music buffet until they’re full?

Ironically, the stats about churn can be fascinating. Did you know that almost 70-80% of users who join a subscription service never churn out? Especially when a service is less than $10 a month (thus the item on the credit card bill is in the single digits and hard to see alongside those other bigger charges) most subscribers have no idea they’re still subscribing to something. It’s only the average 20-30% of users who churn out on a given month. If any subscription service can keep their churn below 20% in any given quarter and bring in more subscribers because of the amazing new content they’re making available exclusively…then users grow and profits do as well.

This is why everyone and their mother is spending $6 billion a year on creating original content. If Netflix, or Hulu or HBO to the Max can keep reminding you that next month there’s gonna be something new to watch. Or they can string out their new episodes (like HBO, Apple TV+ and Disney Plus) on a weekly basis to keep you from burning through everything in one sitting, they’re going to reduce their churn significantly. This is, of course, why the number of users who watched over 70% of The Irishman is extremely timely and important. If you keep people engaged, they don’t think about churning out and burning up your profit.

Part of keeping consumers from churning out is not talking to your customers. At least, not often. Internally, many of these companies have a strict policy on just how many times they can e-mail their consumers. Because if you haven’t watched Gaia or EPIX lately and you receive mails telling you about all the stuff that’s available (which isn’t much), then you’re going to leave yourself a handle little Post-It note to remind yourself to cancel. Have you ever wondered why if you subscribe to an inordinate amount of streaming services that you rarely receive mail from them when they (a) have nothing new to tell you about or (b) generally don’t have anything significant worth sharing?

Out of sight, out of mind. Out of mind…and churn goes down. The equation is simple: c + e = g; or content plus engagement equals growth. If your content sucks or you can’t get people to engage, then get ready for the churn and burn, because it’s coming fast.

Announcements like Lord Director of Sarandos’ one this week isn’t just about sharing numbers. The numbers don’t matter much, since Netflix can make anything look good if they want it to. It’s about press for you, the potential churner, to ensure you know that what they’ve got…is worth keeping. That if you wanna be a part of that water cooler talk, you’ve gotta subscribe. That over 26 million of your friends are in the know…so you’d better not be the one who isn’t.

It’s a fascinating game, but with one ultimate goal.

Keep the users and burn the churn.

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