Netflix is betting that the password-sharing campaign will reverse its dwindling revenue and fluctuating subscriber count. Historically, the company has not 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 is going to take advantage of all those users who have been losing money all these years, right?
Well, it might not be that simple.
Netflix — where “password sharing is something you have to learn to live with” co-founder and now former CEO Reed Hastings once said — told investors last year that password sharing contributed to the first loss of streaming subscribers in more than a decade. After months of testing across Latin and Central America, Netflix has finally brought paid sharing to Canada, New Zealand, Portugal, Spain and now the US. Under its new rules, Netflix wants users to pay an additional $7.99 per month to allow only one person outside their household to access their subscription.
There are still many questions about how Netflix will actually implement this — and whether it will actually help increase the company’s bottom line. Netflix has warned its investors about “cancellation backlash” many times in the past when talking about paid participation, which means that some people will cancel their subscriptions in response to the posting to their site. You’ve already seen this kind of interaction in Spain, where data from analytics group Kantar found that the streamer lost 1 million users in the wake of the campaign.
But for Netflix executives, the “improved gross revenue” will eventually outweigh those lost subscriptions. In its most recent earnings report in April, Netflix said it was “pleased with the results” of its password sharing campaign in Canada, New Zealand, Portugal and Spain, while adding that its subscriber base in Canada is now growing faster than it was in the US. are a “reliable indicator” of what’s going to happen here, Dan Rayburn, a streaming media expert and industry analyst, says. the edge “This is not a fair comparison,” as the number of subscribers and households in both countries is “quite different.”
Netflix also doesn’t take into account how many subscribers would choose to cut their plans rather than cancel them outright, something Rayburn says is also a big problem for the company. Without sharing passwords, the more expensive Netflix plans lose some of their value, as some users may only sign up for these plans because of the feature that lets multiple people watch Netflix at once from different devices — and across different homes.
While Netflix’s Standard plan of $15.49 per month lets you watch Netflix on two devices simultaneously, the Premium plan of $19.99 per month allows up to four simultaneous viewers. The shift toward password sharing could mean that some users will choose to subscribe to the $9.99 per month Basic plan rather than cancel their subscription, which allows users to watch Netflix on only one device at a time. This potential trend could deal a blow to Netflix’s average revenue per user (ARPU), which was $16.18 in its latest earnings report. “Cancellations will hurt, but cutbacks will hurt, too, because Netflix can’t make that up in advertising,” Rayburn explains.
“All streaming platforms face the same dilemma of how to handle password sharing.”
Whether or not paid participation hurts Netflix’s balance sheet, it could have major implications for the entire streaming industry. Other companies, such as Disney and Warner Bros. Discovery and Paramount, to see how consumers respond to Netflix’s password-sharing campaign. If all goes well, other services may want to follow suit, similar to how we saw several streamers jumping on the price hike bandwagon last year.
“All streamers have the same issue of how to handle password sharing,” said Paul Erickson, Director of Strategy and Insights at Erickson. the edge. “Everyone will look at this or take their cues from how Netflix handles this, how the American consumer reacts, or how they react and push themselves forward.” With a major streaming device like Netflix getting into paid syndication, there’s always a chance it could become an industry standard. Erickson says he sees paid participation 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.”
Aside from the Netflix investors, I don’t think anyone is happy with this change — especially since Netflix is the only service that makes users pay extra. It’s still too early to tell how many subscribers a streamer will lose due to the change, how many will opt for a cheaper plan, or how many will actually buy additional accounts. But Netflix must be careful how it implements the change. After all, you don’t want to alienate all of the paying customers who helped put the service in front of more eyeballs by Share their passwords.
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