To Share or Not to Share
Netflix once said, “Sharing is Caring.”
That tweet from 2017 certainly did not age well. In fact, in the world of streaming, 2017 was eons ago, today’s streaming market of 2023 is much different than that of 2017. For the first time ever, linear TV viewing dropped below 50% of total viewing hours. Streaming now accounts for just under 40% of all viewing hours. Many companies anticipated the growth of streaming, in the last few years lots of new services entered the market and more customers subscribed to one or more services. Compared to 2017, Netflix is now competing in an oversaturated and competitive market. They are struggling to obtain and retain subscribers and need to search for new revenue sources.
The company estimated that more than 100 million households had shared their log-in credentials with friends and family outside their homes. Earlier this year, Netflix began testing ways to limit password sharing in a few countries. Being the first streaming service to experiment with this, they had to come up with the right plan that would restrict password sharing and protect their revenue but not alienate their subscriber base. Hence, a new paid sharing plan went into effect May 23rd in the USA that cracked down on user password sharing with anyone outside a ‘designated household’ by limiting access to your account based on device and location. Netflix’s new policy does allow you to add additional users outside your household – for a fee. The fee is less than the standard plan but more than the basic with ads plan. Experts expect that about 50 million users will ultimately create their own accounts. Fifty million new subscribers would definitely help reverse their stagnant subscriber growth and generate revenue!
While the new policy might have angered some subscribers, Netflix’s efforts to curb password sharing did manage to reinvigorate its user additions. There were almost 6 million new subscribers since the crackdown. In fact, the number of new subscribers outpaced the cancellations for the same period. In addition, data suggests that the demand for the streamer’s library actually increased by 4.5% in the month following the crackdown in the USA. Given the success of this new policy in the US, we can expect Netflix to continue to roll out their new password policy throughout the rest of the world.
So far Netflix’s experiment has proven successful, which just begs the question: when and will the other streaming companies follow suit? Just like every teenager out there, big business is susceptible to peer pressure, and the possibility of increased subscriber revenue might be just too tempting to pass up. Perhaps as a result of Netflix’s success and its own need to generate revenue to make streaming profitable, Disney+ already announced plans to limit password sharing in the coming months. The details of their plan have not been disclosed yet, but they have the technology in place to reduce their significant password-sharing problem. We suspect it’s only a matter of time before Amazon Prime, Hulu, Apple, Paramount, and others follow suit.