Netflix could ruin password sharing for everyone

Netflix is ​​betting a crackdown on password sharing will reverse its dwindling revenue and wavering subscriber count. The company never enforced its one-account-per-household policy. Now, by charging members to share their subscriptions with people who live in other homes, Netflix will take advantage of all those users they’ve been missing for all these years, right?

Well, maybe it’s not that simple.

Netflix – where co-founder and now former CEO Reed Hastings once said “password sharing is something you have to learn to live with” – told investors last year that password sharing password had contributed to the streamer’s first subscriber loss in more than a decade. After months of testing across Latin and Central America, Netflix has finally introduced paid sharing in Canada, New Zealand, Portugal, Spain, and now the United States. Under its new rules, Netflix wants users to pay an additional $7.99 per month to allow just one person outside their household to access their subscription.

Many questions remain as to how Netflix will actually implement this – and if it will actually help boost the company’s bottom line. Netflix has warned its investors of a “cancellation reaction” several times in the past when talking about paid sharing, meaning some people will cancel their subscriptions in response to the rollout in their locations. He’s seen this kind of backlash before in Spain, where data from analytics group Kantar revealed the streamer lost 1 million users as a result of the crackdown.

But for Netflix executives, “enhanced overall revenue” will eventually outweigh those lost subscriptions. In its latest earnings report in April, Netflix said it was “satisfied with the results” of its crackdown on password sharing in Canada, New Zealand, Portugal and Spain, while adding that its database subscribers in Canada “was now growing faster than in the US.” While Netflix assures investors that its results in Canada are a “good indicator” of what will happen here, Dan Rayburn, a streaming media expert and of the industry, tells The edge “It’s not a fair comparison” because the number of subscribers and households in the two countries are “so different”.

Netflix also doesn’t take into account the number of subscribers who will choose to reduce their plans instead of canceling them altogether, which Rayburn says is also a big problem for the company. Without password sharing, Netflix’s most expensive packages lose some of their value, as some users might only subscribe to these packages because of the benefit that allows multiple people to watch Netflix at once. from different devices – and in different homes.

While Netflix’s $15.49 per month Standard plan lets you watch Netflix on two devices at once, the $19.99 per month Premium plan allows up to four concurrent viewers. The move to password sharing could mean some users will opt for the basic $9.99 per month plan instead of canceling their subscription, which allows users to watch Netflix on one device at a time. This potential trend could deal a blow to Netflix’s average revenue per user (ARPU), which stood at $16.18 in its latest earnings report. “Cancellations are going to hurt, but downgrades are also going to hurt because Netflix can’t make up for that in advertising,” says Rayburn.

Whether paid sharing ends up hurting Netflix’s bottom line could have huge implications for the entire streaming industry. Other companies, like Disney, Warner Bros. Discovery and Paramount, are likely looking to see how consumers react to Netflix’s crackdown on password sharing. If all goes well, other services may want to follow suit, similar to how we saw several streamers jump on the price hike bandwagon last year.

“All streamers face the same dilemma of how to handle password sharing,” said Paul Erickson, director of Erickson Strategy and Insights. The edge. “Everyone is going to take a look at this or be inspired by how Netflix handles this, how the American consumer reacts or how they react and move forward themselves.” With a streamer as big as Netflix getting into paid sharing, there’s always a chance it could become an industry standard. Erickson says he views paid sharing as “part of the maturation” of the streaming industry, noting that “it had to be sorted out at some point, and it’s happening now.”

Netflix investors aside, I don’t think anyone is happy with this change, especially since Netflix is ​​the only service that charges users extra. It’s still far too early to tell how many subscribers the streamer will lose over the switch, how many will choose a cheaper plan, or how many will actually purchase additional accounts. But Netflix needs to be careful how it implements the change. After all, he doesn’t want to alienate all the paying customers who helped put the service in front of more eyeballs. by share their passwords.