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Unlocking Netflix's Triumph: Navigating Subscription Cycling

In a landscape reshaped by streaming, Netflix has been able to not only drive content consumption but also shape consumer behaviour. Recent research from ScreenThink found that Netflix’s crackdown on password-sharing has not only led to a 10% surge in paying subscribers, reaching 70% of total users, but has also unveiled that 60% of those surveyed experienced “content fatigue”, with the platform boasting nearly 8,000 pieces of content. This dichotomy calls for an exploration into the nuanced dynamics of subscription video-on-demand (SVOD) services.

Netflix’s proactive approach to combating password-sharing marked a pivotal moment in May 2023, with subscribers now being required to pay an additional £4.99 per month to share an account with up to two people in their household. This led to a staggering 102% increase in daily sign-ups (compared to the average for the two months prior), surpassing 70,000 a day. This move echoed across the industry, with Warner Bros Discovery and Disney announcing similar plans to curb sharing this year.

However, ScreenThink’s insights uncovered the concurrent trend of subscription-cycling (or toggle behaviour), with 12.5% of those surveyed feeling comfortable subscribing to and unsubscribing from SVOD services on a short-term basis. With a sea of content choices now available to viewers, binging comes as standard and consumers begin to feel less tied to one subscription, especially in an effort to cut costs.

Netflix’s success in cracking down on password-sharing highlights the allure of extensive content libraries. However, as ScreenThink notes, smaller platforms such as Apple TV+ (with less than 500 titles) face unique challenges. Despite boasting high-quality content, smaller platforms with limited libraries are more likely to experience higher churn rates. The report found that the initial attraction of prestige originals, such as Ted Lasso and Severance, fades swiftly, with users seeking broader content offerings after consuming the available content on the platform.

As 26% of users admit to subscription-cycling Apple TV+ in the past months, and 34% expressed the likelihood of cancelling their subscription, the efficacy of password-sharing crackdowns varies across platforms. Philippe Epailly, Head of Quant and MTM ScreenThink, emphasises how important it is for smaller platforms to “demonstrate clear value beyond simply offering a large content library” to retain subscribers. With the UK’s subscription services nearing saturation, differentiation and innovation become imperative when captivating and retaining audiences amidst intensifying competition.

The evolving landscape extends beyond subscription dynamics, encompassing a shift in demographics and viewing patterns. ScreenThink’s data shows a 13% decline in 16-to-34-year-olds prioritising SVOD services when looking for something to watch (compared to Q2 2022), opting for live TV and broadcast VOD (BVOD) services like BBC iPlayer and ITVX first instead. This is in line with Barb’s latest audience data, which reveals a 2% drop in homes across the UK with access to SVOD services in Q4 2023. Kantar’s Entertainment on Demand study reinforces this trend, documenting a surge in planned cancellations quarter on quarter across all major SVOD providers. These shifts, catalysed by the allure of high-quality content available to viewers on free-to-air channels, signify a broader transformation in viewing behaviour across the UK.

As SVOD services confront multifaceted challenges, platforms must cultivate unique value propositions to secure their position in the consumers’ subscription rosters. With viewers looking to cut costs and subscription services often being the first to go when doing so, innovation will allow SVOD services to transcend content fatigue and foster enduring relationships with subscribers.