Netflix Was Most-Canceled Service in Late 2022; Why Password-Sharing Rules Might Hurt Streamer Worse than Predicted
To say Netflix has had a tumultuous few months would be a fairly sizable understatement. The world’s largest streaming service gained more than 7 million net subscribers across the globe in the fourth quarter of 2022, but the confusion and controversy surrounding its forthcoming measures to crack down on password sharing have given the company no time to savor its success.
New data from TiVo shows that there could be more troubling times ahead for Netflix. TiVo conducted a survey during Q4 to determine major trends in the streaming video world and found that 26.6% of all streaming users canceled a service during that time period. Netflix led the way, with 27.3% of users who let a service go identifying it as the subscription they canceled. No other streaming service was canceled at a rate of more than 9.1% by users.
What caused this sudden rash of cancelations? One must look no further than the ever-present specter of rules against password sharing. Netflix first announced in October 2022 that measures to prevent users from sharing their log-in information were to be more widely introduced in early 2023, after months of testing in countries like Chile, Costa Rica, and Peru.
There are obviously other reasons that users canceled Netflix during the final few months of the year; users who signed up only to watch one show, like “Wednesday,” definitely accounted for some of the service’s churn, but a recent survey found that only 17% of users reported canceling a streaming service after watching the show they subscribed for, so it’s probable that the password-sharing crackdown was a big driver in Netflix’s losses.
TiVo’s data also indicates further trouble could be ahead for Netflix once it more widely introduces its preventative measures to stop account sharing. The survey from TiVo indicates that 61.5% of respondents watched video away from home. Subscription video-on-demand (SVOD) sources like Netflix were the second-most popular type of content users preferred to engage with while on the go.
That could be a big issue for Netflix users once the company implements its rules against account sharing around the world, mainly because those measures will rely so heavily on knowing the user’s location. Netflix recently put its rules against password sharing into place in Canada, where users have to connect to their home Wi-Fi once every month so that the company knows where the primary account holder resides.
Unfortunately, the company has provided few specifics on how it intends to determine whether a device is trusted or not. That means that Netflix users could potentially have trouble logging into their accounts when using the service on a mobile device on a different Wi-Fi network, or on devices they don’t own like hotel smart TVs. Netflix has promised there will be a way for account holders to use their service in these situations, but details have been scant.
The biggest warning sign for Netflix, however, may be found in the statistic from TiVo that 42.8% of American SVOD users have shared at least one password. This number indicates that streaming users have been increasingly conditioned to not only think of password sharing as acceptable but to rely on it as a means of expanding their entertainment options. With so many streaming users convinced that password sharing is both ethical and useful, Netflix might see a much larger churn rate than anticipated when it puts its measures to halt password sharing into effect.
Nonetheless, Netflix users should still anticipate those measures rolling out sooner rather than later. The company is convinced they will meaningfully boost revenues and is determined to launch them sometime this quarter. But the backlash could be quite severe, judging from the number of Netflix users who canceled their accounts in Q4, likely in response of these anti-password sharing rules.
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