• by Karlene Lukovitz  @KLmarketdaily, August 7, 2023

Netflix appears to be weathering, or even benefiting from, its decision to ban account sharing as of the end of May. The service reported adding an impressive 5.9 million global subscribers in the second quarter -- although revenue and profits increases were each only about 3%.

And while turning more non-paying viewers into paying subscribers, the move had little impact on Netflix’s total number of viewers, according to the second-quarter results of Worldpanel's ongoing global Entertainment on Demand (EoD) study.

“In the month since the crackdown, fewer Netflix subscribers claimed they were using an account that someone else paid for. But looking beyond one month, these figures do not represent a large shift,” note the analysts.

In addition, planned cancellations with Netflix’s U.S. subscriber base rose to 5% in Q2, from 4% in Q1, according to the study.

Rates in some key markets, such as Germany, Spain and the U.K., were at 8% to 9% in the quarter (chart above).

Still, Netflix was “likely safeguarded from exceptionally high churn from its password-sharing crackdown due to its reputation for content,” the study points out. Netflix is still the top destination for new content: 34% choose Netflix when looking for a new series or film, followed by 13% who head to Amazon Prime Video.

“For services looking to replicate Netflix’s strategy, it will be critical to understand how streamers rate and rank their service to properly analyze the risk in taking a similar step,” points out the report. “Netflix has unique strengths that prevented churn, but not every service would see similar results.”

Amazon Prime Video, Apple TV+ and Discovery+ saw the fastest growth in subscriber share in the quarter. Apple TV+’s growth was driven by “Ted Lasso,” which was the most-watched subscription video-on-demand (SVOD) title in the quarter. 

However, for the business as a whole, Q2 brought a rise in so-called “boomerang” subscribers — consumers cancelling services that they perceive as failing to drive sufficient viewing time in the context of their cost. Lack of new releases and inadequate perceived value were the biggest cancellation drivers for SVODs, even before the content impacts of the writers’ and actors’ strikes had made much of an impact.

Content continues to be the prime driver of subscriber acquisitions, and lack of new content drives increases in service disuse.  

A third of all new streaming services used in Q2 were driven by a specific title, according to the report. In addition, 18% of streamers who don’t use a given streaming service at least weekly report being disengaged because there’s not enough new TV or film content. One in five say they're disengaged because they have too many subscriptions.

“When new content releases are put on hold or postponed, we can expect increased competition, a challenging environment to win new subscribers, and an increase in churn as streamers evaluate their spending and the value they receive from streaming,” sums up the report. The streaming services that will fare best will be those that can “fall back on an existing strong content library and an excellent user experience” – Disney+ being a prime example, it notes.

Other Q2 findings:

During the quarter, 116 million U.S. households used at least one video-on-demand service, representing 90% of households.

Four percent of U.S. households used a new streaming service in the period — down from 6% in Q1, but in line with seasonal trends. (SVODs have seen slowed growth during Q2 for the past three years.)