2023-05-28 00:57:00
In a surprising move, Netflix has decided to crack down on password sharing, a practice it has tolerated for years. The streaming giant, which has been dealing with falling revenue and fluctuating subscriber numbers, hopes this new strategy will help turn the situation in its favor.
Unlike its previous stance, Netflix now plans to enforce its one account per household policy, making members pay extra for sharing their subscriptions with people who live in different households.
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The company believes that by monetizing these previously untapped users, it will be able to recover some of the revenue lost in previous years. However, the success of this venture may not be as simple as expected.
- Netflix attributed its first loss of subscribers in over a decade to password sharing.
- The company has introduced paid sharing in several countries, including Brazil.
- Under the new rules, users must pay an additional BRL 12.90 per month to grant access to just one person outside their home.
- The cancellation backlash has already been seen in Spain (which was one of the countries where the feature was previously tested), with a loss of 1 million users.
- Netflix executives believe that revenue improvement will offset canceled subscriptions.
- Netflix’s report highlighted the accelerated growth of the subscriber base in Canada, surpassing that of the United States.
- However, there are significant differences between the two countries.
- The possibility of subscribers downgrading their plans should be a concern for the company.
- Netflix’s most expensive plans lose some of their appeal without password sharing
That’s because users may have signed up primarily for the ability to simultaneously stream content across multiple devices and homes.
For example, Netflix’s Standard plan, priced at BRL 39.90 per month, allows streaming on two devices simultaneously, while the Premium plan, priced at BRL 55.90 per month, allows up to four simultaneous views. The switch to paid sharing may prompt some users to opt for the more affordable Basic plan, priced at R$25.90 per month, which limits streaming to a single device at a time.
This potential trend could negatively affect Netflix’s average revenue per user. Explains Rayburn: “Cancellations are going to hurt, but downgrades are going to hurt too because Netflix can’t make up for that with advertising.”
Other streaming can join
Whether or not paid sharing hurts Netflix’s finances, its fallout could ripple across the entire streaming industry. Competitors like Disney, Warner Bros. Discovery and Paramount are likely watching closely how consumers respond to Netflix’s crackdown on password sharing. If successful, other services could follow suit, as was the case with last year’s price hike.
Paul Erickson, director of Erickson Strategy and Insights, highlights the common challenge faced by all streaming platforms: how to deal with password sharing.
Everyone is going to take a look at this or be guided by how Netflix handles it, how the American consumer reacts, or how they react and move forward on their own.
Paul Erickson
Given Netflix’s massive presence in the streaming market, one cannot rule out the possibility that paid sharing will become an industry norm. Erickson believes paid sharing is a natural progression in the maturation of the streaming industry, stating, “This needed to be addressed at some point, and it’s happening now.”
Aside from Netflix investors, it seems that few are happy with this change, especially considering that Netflix is the only service that requires additional payment for sharing passwords. It’s still too early to gauge how many subscribers the streaming platform could lose, how many will opt for cheaper plans or how many will actually buy additional accounts.
However, Netflix should tread lightly in implementing this change, as it risks alienating paying customers who have played a vital role in expanding the service’s reach by sharing their passwords.
With information from The Verge.
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