Comcast Xfinity-Netflix partnership - Uplift, New Subscribers, and Churn Rate.
The partnership between Comcast Xfinity and Netflix had little or no impact on unit sales of X1 devices, likely no impact on number of new Netflix subscribers, and perhaps a small impact at reducing churn rate for Comcast and Netflix.
X1 DEVICE SALES
Comcast announced on November 4th, 2016, that they would be launching Netflix to their X1 customers. This meant that anyone with X1 would be able to seamlessly access their Netflix accounts through the service. In order to understand how X1 device sales were impacted by this partnership I searched for data on unit sales prior to the partnership and afterwards.
First, I searched through Comcast's financial reports to find figures specific to unit sales of X1 devices over the last few years. Unfortunately, Comcast do not release the details of unit sales specific to their X1 product (e.g. looking through their 2017 annual report). I also looked for other figures that would allow me to calculate this figure, for example I looked for revenue split by product type (e.g. revenue specific to X1 sales). However, Comcast did not post this and nor was this available elsewhere. Their annual report did show a breakdown between video, internet and voice customers, however, we do not know what segment of video customers have X1 over the years.
Although in terms of total video revenue we can see how this increased very little between 2016 and 2017. Suggests that there was limited uplift in X1 sales after the partnership, as this would have driven growth in this area.
I then attempted to calculate this figure in another way, by looking at the increase of subscribers who have X1. I was able to find that just before the partnership, 45% of Comcast's 23 million homes had the X1 box, that's 10.35 million boxes. In addition to this, 10 million also had the X1 voice remote. After the partnership, in 2017 Comcast reported that roughly half of their video subscribers have X1. This totaled to around 11.25 million customers in 2017. That shows an increase of sales of 0.9 million X1 devices over the year after the partnership occurred.
However, data is not available for the previous years to help illustrate whether this was a slowing down or increase in sales of the product. Therefore, we cannot know for sure whether the partnership helped increase sales. However, a jump in 0.9 million sales does not reflect a large amount, given that Comcast have over 22 million video subscribers in total. For this reason we can estimate that whatever impact the partnership had on sales of X1 devices, if any at all, was slight.
NEW NETFLIX SUBSCRIBERS
Netflix has shown slow growth in new US subscribers which does not appear to have been dramatically impacted by their partnership with Comcast. While their customer base has grown, this is mostly due to an increase in their international customer base. Whereas their growth in US customers from 2012 to 2018 has shown just a slow and steady growth. For example, growth from 2015 to 2016 amounted to an increase of only 11.1 million subscribers in the United States. There was very little increase in subscribers in the United States after the partnership of 2016, and only 8 million new subscribers were reported in the United States from 2016 to 2017. This suggests that the partnership with Comcast had little impact for Netflix in terms of numbers of new subscribers.
I first searched for specific churn rates reported before and after the partnership. I looked through online articles, news stories, industry reports, academic articles and statistics databases for this information. However, I can confirm that exact churn rates for recent years are not published online. I suspect that this data remains accessible only to those within the company.
However, I was able to find related data to help understand whether churn rates have increased or decreased since the partnership. Firstly, before the deal, Comcast had reported losing many customers in recent years. It lost 4,000 cable customers in the second quarter of 2016, following a loss of 69,000 subscribers in the second quarter of 2015. In 2017, we see than Comcast are still reporting loss of TV customers (33,000 lost in the forth quarter of 2017), but have seen an increase in internet users.
However, these losses seem to be from TV areas not connected to their X1 subscribers, as the company reports that X1 churn rates were lower than industry average in October 2017. In addition, in the same year the company told us “We expect ongoing churn reductions as Netflix adds more U.S. pay TV integration deals and as X1 penetrations rise.”"
Finally, I also found that Netflix has also reported to be benefiting from lower churn rates thanks to their partnership with Comcast.
To sum up, the data hints that sales of X1 devices have been minimally impacted, if at all, by the partnership between Comast and Netflix. The number of Netflix subscribers is also unlikely to have been impacted, as research indicates there were only 8 million new subscribers between 2016 and 2017, which is actually a decrease from the previous year's annual growth. Finally, I have found evidence to suggest that churn rate has been reduced for both companies involved as a result of the partnership.