The future of streaming services: Examining the impact of Netflix’s password sharing crackdown in the US

Netflix Begins Crackdown on Password Sharing in the US

Netflix has announced that it will begin cracking down on users who share their passwords with people outside their household, a move the company has planned for some time. The streaming video giant is sending emails to all US subscribers who share passwords with people who live outside their homes to encourage them to sign up for their own account. The email emphasizes that, “your Netflix account is for you and the people you live with — your household.”

Motivations for the Crackdown on Password Sharing

Netflix has been turning a blind eye to password sharing for some time as it helped to fuel the growth of its user base. However, a year ago, the company stated that it would crackdown on password sharing since it was hurting its bottom line. The company reports that over 100 million households worldwide share an account. It started to limit password sharing in several countries, including Canada, New Zealand, Portugal, and Spain earlier this year. The email sent to US subscribers is part of its global plan to crack down on password sharing.

The company recently reported a net increase of 1.75 million streaming subscribers globally for the first quarter of this year, which is almost 5% increase from the same period last year. However, it is below the more than three million analysts from Wall Street had expected. Netflix has, in the past, reported that it sees a “cancel reaction in each market when we announce the news” about the paid sharing option. Despite the setbacks, the company says it sees an increase in acquisition and revenue.

The Impact of Password Sharing on the Streaming Giant

The measures that streaming services such as Netflix and Amazon are taking to limit password sharing could have a significant impact on their business model. Limiting password sharing could result in a reduction in user growth rates, an increase in churn rates, and decreased user engagement. These circumstances could mean that users would seek other alternatives. Additionally, Netflix’s price increase earlier this year to $13.99 a month is reducing the overall value the platform offers to users, which could further increase the impact of password sharing limitations.

Advice for Netflix to Consider

Streaming companies need to be sensitive to the reasons their users engage in password sharing and consider ways that they can offer value to users to incentivize them to sign up for their own accounts. Some users may be willing to share passwords because they feel that they cannot afford multiple streaming services. Streaming services may consider creating a low-cost subscription plan that includes a limited number of screens or a limited content library to cater to this segment. Additionally, streaming services could consider adding more social features to their platforms to create a sense of community among users. Netflix may also want to consider offering a discounted family plan that could be attractive to families who currently share an account. Ultimately, streaming companies need to find a balance between increasing profits while not alienating users.