Season four of House of Cards should help reduce subscriber churn this quarter by making fans of the show less likely to cancel. The lower Netflix's churn rate, the fewer sign-ups it needs to grow its subscriber base. Thus, minimizing churn is critical for driving subscriber growth. Nevertheless, given the size of Netflix's subscriber base, even at a 9% churn rate it needs to recruit more than 4 million new subscribers each year just to stand still. That would be a huge improvement from just a few years ago. Netflix stopped reporting subscriber churn in 2012, but a third-party study estimated its annual domestic churn at just 9% last year. Original content has helped reduce Netflix's churn rate in recent years. (Some of those people might later rejoin the service, though.) This meant that over the course of a year, nearly half of its subscribers would cancel. Five years ago, Netflix's monthly churn rate was about 4%.
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Keeping customer churn down New seasons of established series can also help Netflix reduce churn, or the percentage of customers canceling service in any given period. Once they join, these new subscribers will already have dozens of old episodes to watch at their own pace. Each year, this gives Netflix an opportunity to recruit new customers.
Last fall, Ted Sarandos - Netflix's content chief - argued that as Netflix produces more seasons of each original show, "the franchise value grows dramatically."įor example, in the weeks before Netflix releases a new season of an established original series like House of Cards, there is usually a lot of buzz about the upcoming season. However, there are also powerful benefits to adding more seasons of existing shows. He's relying on original content to provide the impetus for these potential customers to take the plunge.Īs Netflix tries to grow its subscriber base, there are some advantages to rolling out completely new series that may appeal to different audiences. would be people who have heard a lot about Netflix but haven't felt "compelled" to join yet. In January, CEO Reed Hastings said that Netflix's most important source of near-term growth in the U.S. Original programming drives growth Netflix management has highlighted in recent quarters how new seasons of popular original series can drive subscriber growth. Let's take a closer look at how the new season of House of Cards could help Netflix. However, the show is also important to Netflix from a financial perspective, thanks to its ability to keep existing subscribers loyal while bringing in new customers. Three years after the series debuted, it remains a key prestige piece for Netflix. House of Cards was Netflix's first high-profile original series. House of Cards was the streaming video pioneer's first high-profile original series, and Netflix spared no expense with the show, hiring A-list talent like Kevin Spacey and Robin Wright. Follow him on Twitter for the latest news and commentary on the airline industry! Follow Friday, the long-awaited fourth season of Netflix ( NASDAQ:NFLX) original series House of Cards was released. He primarily covers airline, auto, retail, and tech stocks. He is an avid stock-market watcher and a value investor at heart. Adam Levine-Weinberg is a senior Industrials/Consumer Goods specialist with The Motley Fool.