I was recently asked to look into churn rates for subscription models. I found it tricky to find real industry numbers, but here are the fruits of my digging.
First of all, how we define churn:
Total Subscribers = (Total Subscribers * Loss Rate) + Acquisitions
To get a churn rate, you need to compare your total subscribers from one period with the amount of change within the base.
Of course, you have to be able to know when a customer leaves. For the purposes of this post, I’m talking about specific subscribers to a paid service. Churn on a free service is, I believe, harder, because you have to decide on some activity rate beyond which you feel that user is gone. Could a week, month, two months, three months…
Second, some things that affect churn:
Your rate of acquiring customers is obviously affected by how viral your service is, and your marketing and promotional efforts. Your subscriber cancellations will always be a percentage of your total user base, and that percentage will be affected by things like the quality of your service, how easy it is to cancel, the competitive situation and so forth.
Getting beyond point of no return
At some point, your customer growth flattens because you can’t add subscribers fast enough to counteract the number of customers leaving. That’s when a focus on customer acquisition and churn reduction is critical, and/or you have to spend more to keep growing at the same historical rate.
Some churn rates I found are below. Naturally some are audited and some are not; some are free and some are not! So take it for what it’s worth!
|Company||Churn Rate||Source / Reference|
|Sprint / Nextel||$2.18% – 2.05%||wikiinvest|
|AT&T||1.17% – 1.69%||ZDNet|
|MySpace||30%||Nielsen, April 2009|
|30%||Nielsen, April 2009|
|60%||Nielsen, April 2009|
|Mobile video services||22%||Nielsen, Sept 2009|
|SiriusXM (in car service)||60%||TheFool|
|Netflix||4.2%||Mainstreet Blog, reporting TheStreet.com|