With 223 million subscribers worldwide and a market cap of approximately $128 billion, Netflix remains the market leader in the highly competitive streaming business. But the US media company is struggling with declining subscription numbers. As such, it’s about to make a big comeback and stop sharing a Netflix account, according to the Wall Street Journal.
The company plans to eliminate the ability to share passwords with friends and family members as early as next year. Users who share an account must then be asked to pay for it separately. Netflix will likely launch in the US in early 2023. So far, neither an exact date nor any additional fees are known.
Plans delayed due to Corona high
Five years ago, Netflix tweeted: “Love is a shared password.” At the time, business was growing rapidly and the company saw steady growth in paying customers. Everything changed in 2019, when the streaming service suffered a rare US subscription drop in the second quarter.
This was a warning signal for the leaders, they went to investigate the cause. Bosses identified password sharing as part of the problem. Even then, there were initial considerations to prevent joint use of accounts.
But then came the epidemic – and with it the restrictions. The closure of movie theaters, restaurants, and other nightlife venues has left many people at home in search of entertainment, resulting in an influx of new subscribers to Netflix. In the first quarter of 2020 alone, the company registered nearly 16 million new subscriptions sold. Efforts to examine password sharing fell into the background.
This year, the situation has changed again. In the first half of 2022, Netflix lost 1.2 million customers. The streaming service returned to user growth last quarter, thanks to the success of series like “Stranger Things” and “Dahmer: Monster.” However, the issue of joint account re-entered the agenda of the board of directors.
At a Netflix meeting earlier this year, co-founder and co-CEO Reed Hastings told executives that the outbreak boom masked the scale of the password sharing problem. The company had waited too long to deal with this.
The first tests are already in Latin America
Netflix is currently testing the password sharing ban in Latin American countries. Sharing payment accounts is common here. In addition, the streaming service in Latin America is also fighting the illegal trade of stolen passwords.
In these tests, users are required to pay for accounts shared with people who do not currently live in the same household. Instead of preventing common users from accessing the account, Netflix asks the main account holder to enter a device verification code within 15 minutes.
After entering the code, the person who borrowed the password will be able to watch Netflix without restrictions, but will be required to pay a share fee with a message. According to the Wall Street Journal, the company has had good experiences with this approach. That’s why the streaming service plans to use this solution as a guide as it implements its plans in the United States.
Do not jeopardize your own reputation
That’s why Netflix wants to gently enforce the ban initially, and then gradually increase the pressure on password sharing. Being too harsh risks making the company angry with customers and thus losing the good reputation it has built over many years. Co-CEO Ted Sarandos said in a meeting with investors in early December that he didn’t think users would immediately like the change.
In this highly competitive market environment, users have many transition options. Just a few days ago, US film production company Paramount Pictures’ Paramount+ streaming service launched in Switzerland. And in previous years, other offers from major players such as Disney and US broadcaster HBO (HBO Max is available indirectly via Sky in Switzerland) have been added. Due to increasing competitive pressure, Netflix had to lay off last spring.
Netflix is now the first provider to actively block password sharing. Competition can do the same later because they too are under pressure.
Based on the price of the new low-cost subscription
Netflix launched a cheap subscription with ads in early November to attract new customers. Switzerland was not among the twelve countries to which the new proposal was submitted. But it should come later.
In Germany, the subscription model, where ads are shown at the beginning and middle of a TV show or movie, costs 4.99 euros per month. $6.99 per month in the US. Netflix plans to set the account sharing fee based on these prices. The amount in the US should only be marginally less than $6.99 to encourage password borrowers to buy their own subscription. This way, they would have full control over their own account and would not have to ask the main user to pay a fee for sharing.
The leading streaming service, with its plans, is actually only rigorously enforcing its existing rules. Netflix already only allows account sharing between people living in the same household in its terms of use. So far, the company has ignored the breaches. However, this tolerance now seems to have come to an end.