Netflix lived with their users sharing passwords up until now because it didn't hurt the growth of their subscriber count. Now that outside forces have since changed the game - i.e. more streaming services - thus affecting their subscriber count, those running the show at Netflix are changing their approach.
After Netflix reported a quarterly subscriber loss yesterday - going from 221.84 million to 221.64 million - for the first time in its history, Netflix has decided to crack down on the users who share their passwords with friends and family. While Netflix believes that password sharing played a part in the service growing as big as it did, they also believe it's prominent enough to also currently disrupt the business.
“This is a big opportunity as these households are already watching Netflix and enjoying our service,” the company wrote in its letter to its shareholders. “Sharing likely helped fuel our growth by getting more people using and enjoying Netflix. And we’ve always tried to make sharing within a member’s household easy, with features like profiles and multiple streams. While these have been very popular, they’ve created confusion about when and how Netflix can be shared with other households.” In this same letter, Netflix estimates that “over 100 million” households worldwide are using shared Netflix accounts, including more than 30 million in the U.S. and Canada, and they cite this as a factor for “creating revenue growth headwinds.”
Though Netflix wants to crack down on this in hopes of righting the ship regarding their subscriber count, they understand that doing so can't be done right away. “It’ll take a while to work this out and get that balance right,” COO Greg Peters said. “My belief is that we will go through a year or so of iterating, and then deploying that.”
Odds are, cracking down on password sharing will probably only be Step 1 of a major overhaul going down over at Netflix over the next little while. Cracking down on password sharing will probably help their subscriber count to some degree, yes, but there are other factors at play here. They now have more competitors in their line of work who can currently stream more popular properties, like Disney Plus streaming Star Wars and the Marvel Cinematic Universe and HBO Max streaming their original series and the DCEU. Don't be surprised if we see Netflix up their per-month prices and start integrating ads into the content they stream to keep up with the competition.
Now whether this will be effective is anyone's guess. Sadly, because Netflix revolutionized how viewers consume movies and television, they have become victims of their own success by virtue of providing a template that their competitors could both use and improve upon. Netflix can take pride in knowing that they invented the streaming service, but now their next challenge is how they stay ahead of the game that they created.
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