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Is Netflix’s Domestic Churn Rate about to Increase?

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Netflix’s stock has been treading water

Netflix’s (NFLX) stock saw a massive ~40% spike in its stock in the first couple of weeks this year, as it recovered from a poor run in late 2018. However, the stock has pretty much treaded water since. The stock has not moved much since January as investors have been wondering whether upcoming stiff competition from media conglomerates and Apple will chip away at Netflix’s domestic subscribers, which are already slowing down.

The company added an impressive 1.74 million paid domestic subscribers during the first quarter, representing an acceleration in growth. However, the company expects to add only 300,000 paid subscribers in the US. However, the streaming giant’s projections have typically been conservative.

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Netflix’s early-mover advantage will be key as it faces more competition

It is not likely that an average American will subscribe for all the SVOD (subscription video-on-demand) services. However, an average American could have multiple SVOD subscriptions. And in that scenario, Netflix is not likely to lose out to the new commerce, given the loyalty the company has built in the country.

Netflix’s early-mover advantage will come into play as the company now has a great library of original content. Even if the competing media companies strip their content from Netflix, the latter has enough quality content to keep its churn rate low.

Meanwhile, the company’s subscriber growth internationally has been phenomenal. However, Netflix makes much more per subscriber in the US compared to internationally. The company will report its second-quarter results on July 17.

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