January 31, 2023

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Netflix Password Sharing Crackdown: Why It Won’t End Account Sharing

3 min read

Starting next year, Netflix will start nagging customers to pay extra if it detects they’re sharing their accounts with people outside their family — in violation of the streamer’s terms of use.

But users determined to continue violating Netflix’s password-sharing rules won’t face any harsh repercussions for now: The company won’t close anyone’s account even if they share passwords, nor is Netflix likely to impose additional fees without the customer’s consent.

By early 2023, Netflix plans to expand beyond its initial tests in Latin America to introduce “a thoughtful approach to monetizing account sharing,” the company said in October. This would encourage password-sharers to create sub-accounts (“additional members”) for people outside their household to pay. Recent headlines about the initiative — “The End of Netflix Password Sharing Is Coming” (Wall Street Journal) and “The End of Free Netflix Password Sharing Is Coming” (CNET) — make it look like the company will start going no-nonsense. Account Sharing Rules with Penalties. In fact, Netflix’s password-sharing-monetization plan is largely based on the honor system.

Netflix has not disclosed how much an additional member sub-account will cost in the US or other new markets. In Chile, Costa Rica, and Peru, that fee is 23%-29% of Netflix’s standard two-stream plan, suggesting that sub-accounts in the US could cost roughly $3.50-$4.50 each. In three test markets, Netflix appears to be sharing their accounts outside of their families (identified based on data such as IP addresses, device IDs, and account activity from devices signed into Netflix accounts) that Netflix notified about new payment options. Netflix prompts users to verify their credentials by sending a verification code to the primary account-holder.

And if the customer doesn’t pay for password piggybackers? All signs are that the most aggressive thing Netflix wants to get at in its first iteration of the paid-sharing rollout is to nudge infringers with email reminders and notifications.

The company’s help page on password sharing currently says, “Netflix won’t automatically charge you if you share your account with someone you don’t live with.” That is unlikely to change in the near future. If Netflix automatically charges a new fee for account sharing, in addition to annoying customers — who have been dealing with password sharing for years. Netflix approves of eye-ears and head-nods – This will attract scrutiny from regulators over potentially anti-consumer billing practices.

The fact that Netflix’s monetization strategy for password sharing is on an opt-in basis raises uncertainty about how much incremental money it will get from the so-called “crackdown.” The company wants to find new revenue streams as core customer growth has slowed (and actually contracted in the first half of 2022). In addition to paid-sharing monetization, Netflix rushed to launch a new, cheaper ad-supported plan in November this year; At first, it seemed off to a relatively slow start.

Netflix estimates that passwords are being shared in violation of its rules with more than 100 million non-paying households worldwide — but obviously, it won’t be able to convert all that activity into revenue. Wall Street firm Cowen estimates that Netflix’s paid-sharing program could add about 15 million paying sharers and 1 million new members next year in the U.S. and Canada, representing $721 million in annual incremental revenue in the UCAN region (up 5.1% from previous estimates). ) ) This is based on a Cowen consumer survey, conducted in August 2022, asking password-sharers whether they would pay an extra $3/month; 50% of respondents said they or the primary account holder would. Needless to say, however, people differ say What they will do and what they will do actually to do

Meanwhile, Netflix has rolled out additional features designed to encourage password-suckers to do the right thing and pay for legitimate account access. This fall, it added the ability for customers to convert user profiles into separate new accounts and a dashboard so users can remotely log out individual devices.

“We’re never going to roll out anything that feels like ‘turning the screw'” on people who share passwords, Reed Hastings, Netflix’s co-CEO and co-founder, said in the company’s Q1 2021 earnings interview. “It has to feel like it makes sense to the consumer, they understand.” Of course, Hastings once insisted that Netflix wouldn’t launch an ad-supported plan, so — never say never.

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