Netflix has for years ignored the very fact that a lot of us are mooching off our friends’ and families’ accounts. But the streaming king is now reconsidering its look-the-other-way policy, a shift that comes as Netflix’s growth slows, and its annual production allow churning out new hits creeps ever higher.
In other words, Netflix needs extra money.
Netflix and its new password-sharing dynamic
The company in this past week announced that it’s testing a password-sharing crackdown that would curb the amount of accounts mooching off account holders outside their own households.
As a part of this test, Netflix will soon offer users in Chile, Costa Rica, and Peru the power to feature up to 2 additional members to their Netflix membership as sub-accounts. In Costa Rica, this may cost about $3 out of the monthly cost of Netflix.
There is still no news on whether this new paid account sharing tactic will be extended to all of Latin America, or if it will be applied in other countries.
Is Netflix betting on the FOMO effect?
The streaming company has for years been extremely blind eye about password sharing, with Netflix co-founder and CEO, Reed Hastings, going thus far on call it “a positive thing” within the past.
While Netflix technically prohibits users from sharing accounts with individuals outside your household, the company has indicated since the last year or so that it’s looking into ways to softly enforce a shared-account crackdown, mostly through sporadic tests like the one announced this past week.
But something feels different about this new test, because the latest experiment arrives at a critical moment for the corporate. Netflix has long enjoyed explosive subscriber growth, but recently, that’s began to wane.
The company latest decisions indicate that the company is betting on the FOMO effect (fear of missing out). In view of not being able to use the Netflix account of others, this may be the beginning of thousands of new subscribers. Is this possible?
Banning sharing your Netflix password, how good can this decision be for the streaming giant?
Balanced against its astronomical content budget numbering within the tens of billions, Netflix must get creative about how it’s bringing in cash. Going full hall monitor on shared accounts is certainly a method to try to do it, especially since Netflix has in many households cemented itself as an important service.
“Netflix has let it choose an extended, long time,” analyst Richard Greenfield of LightShed Partners tells in an interview, chatting with Netflix’s past ambivalence to shared accounts. “When something becomes so important to your lifestyle, it makes it easier and easier to clamp down on things like password sharing.”
That’s a key difference between this platform and a few of its scrappier rivals, who are arguably competing to be a supplement to, instead of an immediate competitor of, the highest dogs in streaming.
Why Netflix is restricting password sharing
Globally, Netflix has over 221 million subscribers. That outnumbers any other streaming service, including Disney+ and HBO Max.
Reed Hastings has long acknowledged that password sharing allows far more people than its 221 million subscribers to access the streaming service’s content.
Like everybody else, the big guy of the streaming is constant to jack its prices to assist offset its costs, with its latest price hikes set to travel into effect later this month. But while everybody else within the streaming sandbox is introducing ad tiers to lure subscribers (and soften the blow to wallets), Netflix has yet to imitate.
Cracking down on account sharing, then, offers an alternate route for Netflix to feature paying members. Greenfield says that password crackdowns might be a method the successful streaming company adds another 10 to 20 million subscribers in its US market, for instance.
“This is how you shut that remaining gap,” he says.
Time to break up with your ex for good, you won’t be able to use their Netflix account
It’s worth bearing in mind that Netflix remains calling this a “test” for now.
The streaming service corporation hasn’t fully pulled the rug out from underneath those folks lucky enough to possess an ex or grandparent who doesn’t mind sharing their password — and it’s possible this will land on some alternative strategy over booting us from the accounts of individuals outside our own households.
Bringing the hammer down on shared accounts does risk pushing away its own users, which isn’t ideal for any streamer competing for attention immediately.
Streamers aren’t creating content out of a sense of altruism. Regardless of how the current streaming squabble plays out, it will be the users who will be footing the bill for their streaming habits.
Conclusion
The streaming king is reconsidering its look-the-other-way policy, which comes as Netflix’s growth slows, and its annual production allow churning out new hits creeps ever higher.
The streaming company is facing competition from other streaming services and has to figure out ways to keep users on its platform. Password sharing is a way they can do this, but it is risky because it could push away its own users.
It is worth bearing in mind that the company remains calling this a “test” for now. The consequences of not following Netflix’s new restrictions could be quite costly for those who are using their friends and family’s account without permission. Be weary of the consequences that may await you.
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