Netflix's password sharing crackdown is coming to the US
Following its rollout around the world, Netflix's plan to stop people sharing their accounts is now due to start in the US before the end of July.
Netflix logo
Netflix inadvertently revealed the details of its strict password policy in February 2023, when it said it had accidentally posted information intended for countries outside the US. Now in its quarterly earnings report, the company has announced its plans for the States, as well as given some details of how the policy has fared overseas.
"Paid sharing is another important initiative as widespread account sharing (100M+ households) undermines our ability to invest in and improve Netflix for our paying members, as well as build our business," said the company in a letter to shareholders. "We're pleased with the results of our Q1 launches in Canada, New Zealand, Spain and Portugal, strengthening our confidence that we have the right approach."
In that letter, Netflix reveals that it had at least contemplated launching the scheme in the US around February. Saying that "with each launch, we learn more about how best to roll out these changes," Netflix reported that it " could have launched broadly in late Q1, but we found enough improvement opportunities in these areas to shift a broad launch to Q2 to implement those changes."
The intention to launch then was enough that changing it "will shift some of the membership growth and revenue benefit from Q2 to Q3."
While the investor note and financial earnings don't specify the details of how Netflix's password sharing crackdown works, it has functioned broadly the same way in each country where it's been tried. Basically, anyone at a subscriber's physical address can continue using Netflix, but the paying subscriber will have to confirm every month that a user away from there was part of the household.
It's meant to mean that, for instance, someone going to college can still be counted as part of the paying household. But that monthly prompt to confirm should add some friction to sharing an account with anyone else.
"[As] we roll out paid sharing -- and as some borrowers stop watching either because they don't convert to extra members or full paying accounts -- near term engagement, as measured by third parties like Nielsen, will likely shrink modestly," says Netflix. "However, we believe the pattern will be similar to what we've seen in Latin America, with engagement growth resuming over time as we continue to improve our programming and borrowers sign-up for their own accounts."
"For example, in Canada, which we believe is a reliable predictor for the US," it continues, "our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the US."
The long-expected move to cracking down on passwords is one part of Netflix's attempts to grow its revenue. Another key factor was the November 2022 introduction of a new ad-supported tier, giving users a lower-cost entry to the service.
Read on AppleInsider
Netflix logo
Netflix inadvertently revealed the details of its strict password policy in February 2023, when it said it had accidentally posted information intended for countries outside the US. Now in its quarterly earnings report, the company has announced its plans for the States, as well as given some details of how the policy has fared overseas.
"Paid sharing is another important initiative as widespread account sharing (100M+ households) undermines our ability to invest in and improve Netflix for our paying members, as well as build our business," said the company in a letter to shareholders. "We're pleased with the results of our Q1 launches in Canada, New Zealand, Spain and Portugal, strengthening our confidence that we have the right approach."
In that letter, Netflix reveals that it had at least contemplated launching the scheme in the US around February. Saying that "with each launch, we learn more about how best to roll out these changes," Netflix reported that it " could have launched broadly in late Q1, but we found enough improvement opportunities in these areas to shift a broad launch to Q2 to implement those changes."
The intention to launch then was enough that changing it "will shift some of the membership growth and revenue benefit from Q2 to Q3."
While the investor note and financial earnings don't specify the details of how Netflix's password sharing crackdown works, it has functioned broadly the same way in each country where it's been tried. Basically, anyone at a subscriber's physical address can continue using Netflix, but the paying subscriber will have to confirm every month that a user away from there was part of the household.
It's meant to mean that, for instance, someone going to college can still be counted as part of the paying household. But that monthly prompt to confirm should add some friction to sharing an account with anyone else.
Short-term revenue decline is likely
Netflix does expect that it will lose subscribers when the new policy comes into effect in the States, but believes that overall it's worth it."[As] we roll out paid sharing -- and as some borrowers stop watching either because they don't convert to extra members or full paying accounts -- near term engagement, as measured by third parties like Nielsen, will likely shrink modestly," says Netflix. "However, we believe the pattern will be similar to what we've seen in Latin America, with engagement growth resuming over time as we continue to improve our programming and borrowers sign-up for their own accounts."
"For example, in Canada, which we believe is a reliable predictor for the US," it continues, "our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the US."
The long-expected move to cracking down on passwords is one part of Netflix's attempts to grow its revenue. Another key factor was the November 2022 introduction of a new ad-supported tier, giving users a lower-cost entry to the service.
Read on AppleInsider
Comments
Losing those subscribers will be a plus for Netflix. Those subscribers who shared their password with all family members are hurting revenue anyway. Just like Napster and the music industry people will always be able to rationalize thievery, claiming Netflix is overpriced and deserved to be taken down. Human nature at its finest.
Netflix could solve their problem by selling subscriptions on a per-stream basis, with, if they insist, different pricing for picture and audio resolution. Why do they need to spend resources spying on you by policing which IP addresses are accessing which streams? Currently the only way they're "losing" revenue through account sharing is via their $16 and $20 plans, mostly the $20 plan, which is the only one that allows four simultaneous streams. The "standard" $7 and $10 plans only allow a single stream to occur on the account at a given time. If anyone is sharing on those accounts, it's already inconvenient for the customer, and harmless to Netflix, because the required bandwidth doesn't change. The $16 plan allows 2.
If you have a single big-screen TV home theater setup in the den, Netflix does not have a single-stream option for you with a 4K UHD picture. They don't even have a single-stream option for a 1080p picture. For context, Best Buy currently has zero 40" or larger 720p TVs available. Zero. 720p is the black-and-white set of the 21st century. At this point, 1080p is the low-budget standard, yet Netflix even charges extra for that, and double the price of their single-stream ad-free subscription if you want 4K, the standard resolution of most TV's being sold today.
So now, to call back that earlier metaphor, not only are they charging extra for the green clovers and blue diamond marshmallows in your lucky charms, but they're also shrinking the box and employing an angry leprechaun to smack the bowl out of your hands if you dare to try sharing any of those lucky charms you paid for with anyone else.
Keep gnashing those teeth, brother.
I reckon I'd maybe have a dollar. Still, free dollar!
The shrinkflation argument is pretty much business as usual across the board for many producers lately. The choices of-late are jack up the price, reduce the quantity, or do a bit of both. At least Apple has been doing better in this regard, especially with the new M2 Mac mini.
Your final metaphor is interesting, but not exactly applicable in my opinion:
"So now, to call back that earlier metaphor, not only are they charging extra for the green clovers and blue diamond marshmallows in your lucky charms, but they're also shrinking the box and employing an angry leprechaun to smack the bowl out of your hands if you dare to try sharing any of those lucky charms you paid for with anyone else."
The non-applicable part is that if you buy a box of magically delicious Lucky Charms and decide to share them with family, friends, or whomever, you are giving up your Lucky Charms and can no longer consume them yourself. When Netflix was not actively enforcing the number of concurrently active streams, i.e., no bowl smacking, you weren't giving up anything when you shared your Lucky Charms. Everyone you shared with was getting their own free box of Lucky Charms because you paid for one box.
Now if Netflix actively enforced the number of concurrently active streams and if the subscription cost was purely based on the number of number of concurrently active streams you paid for the sharing thing would be moot. If you wanted to pay for 10 streams and give 9 of them away, or if 20 people wanted to time-share those 9 extra streams you gave away, that would be your choice and Netflix should not care one bit because they'd enforce the hard limit on the number of active streams. You'd simply be giving away a portion of what you bought, which is a loss to you. This seems like a totally fair approach for everyone involved, regardless of what Netflix did in the past.
Perhaps a better metaphor would be if General Mills only included the marshmallows in multipacks of cereal boxes and is now sending out an angry leprechaun to stop you from sharing the extra boxes.
As far as the last point, I think Netflix is already enforcing the number of concurrently active streams, and that's perfectly ok. The fifth person to try to simultaneously watch something on a four-stream account gets an error message until somebody else finishes. It's a four-stream account. There's nothing wrong with that, and I think that's already happening. The problem here is that they're now saying they'll stop the second person (or even the first) from watching something on a four stream account if that person is streaming from the wrong IP address. They're saying you can only have the green clover marshmallows if you buy the big warehouse club multipack, and none of those boxes of cereal from that multipack may be eaten by anyone outside of your household, ever, even when the boxes inside your household are sitting idle in the cupboard.
I suppose any company that is selling a service is free to place whatever restrictions they want on how their service is consumed. Some of the apps I use every day including, for example, Office 365, Carbon Copy Pro, 1Password, etc., have restrictions that are tied to different editions, like personal, team, family, household, enterprise, educational, unlimited, etc., of the products. If we view software products as being simply a means to consume a certain type of service, they too define editions/versions that define and restrict the scope of customer’s consumption of what they provide.
The sellers of these products/services tend of hold all of the cards for whatever they sell. As consumers we can only choose whatever’s best for us functionally and financially. At some point the sellers can, and often will, redefine what they will make available for sale and we have to grin and bear it or kick them to the curb. Was I happy when 1Password and Microsoft changed their selling models to focus on subscriptions versus one-time purchase? Nope. Will I be happy the first time I try to use my Netflix subscription when sitting in a hotel in Kansas and it doesn’t work? Nope. Was I happy when Apple stopped charging for macOS upgrades and decided to give away iWork. Yes. Was fairness ever part of any of these changes? Probably not.
Sometimes you win and sometimes you pay.
How to Know if Too Many People Are Using Your Netflix Account
While you can be signed into Netflix on multiple devices, you can only actively watch a stream on the number of screens included in your plan. This means that if you have the two-screen plan, you can still have three people signed into your account on various devices, as long as they aren't all watching at the same time.
However, if you see a message like Too many people are using your account right now, the maximum number of people watching on your account is already reached.
Wrong way: Require a 4-device service tier for 4K, then refuse to let me share it with my mother despite only using 50% of the devices I’m paying for. (Netflix)
…only one of these businesses aligns their interests with their customers interests. When companies don’t align their interests they are in conflict with their customers. This is a sub-optimal way to run a business.