Netflix Might Ruin Password Sharing For Everyone

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

Well, it might not be 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 contributed to the streamer’s first loss in subscribers in over a decade. After months of testing throughout Latin and Central America, Netflix finally brought paid sharing to Canada, New Zealand, Portugal, Spain, and now, the US. Under its new rules, Netflix wants users to pay an extra $7.99 per month to let just one person outside their household access their subscription.

Many questions remain about how Netflix will actually implement this — and whether it will actually help increase the company’s bottom line. Netflix has warned its investors of a “cancel reaction” several times in the past when talking about paid sharing, meaning that some people will cancel their subscriptions in response to the rollout in their locations. It has already seen that kind of reaction in Spain, where data from the analytics group Kantar found that the streamer lost 1 million users following the crackdown.

But to Netflix execs, the “improved overall revenue” will ultimately outweigh those lost subscriptions. (...)

While Netflix’s $15.49 per month Standard plan lets you watch Netflix on two devices at a time, the $19.99 per month Premium plan allows up to four simultaneous viewers. The shift toward password sharing could mean that some users will opt to go for the $9.99 per month Basic plan instead of canceling their subscription, which allows users to watch Netflix on just one device at a time. This potential trend could deal a blow to Netflix’s average revenue per user (ARPU), which sat at $16.18 in its last earnings report. “The cancellations will hurt, but the downgrades will hurt as well because Netflix can’t make that up in advertising,” Rayburn explains.

Whether or not paid sharing ends up hurting Netflix’s balance sheet, it 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 respond to Netflix’s password-sharing crackdown. If all goes well, other services might want to follow suit, similar to the way we saw several streamers hop on the price hike bandwagon last year.

by Emma Roth, The Verge |  Read more:
Image: Nick Barclay/The Verge

[ed. Seems like a desperation move. The current streaming system is unsustainable and will probably go the way of most big business these days - consolidation around a few major players.]