Why the ‘crackdown’ on Netflix password sharing won’t actually put an end to illegal account borrowing

Starting next year, Netflix will start harassing customers to pay extra if it finds they’re sharing their accounts with individuals outside their home — in violation of the streaming device’s terms of use.

But users intent on continuing to flout Netflix’s password-sharing rules won’t face any harsh repercussions for now: The company won’t terminate someone’s account even if they share passwords, and Netflix isn’t likely to charge extra without the customer’s consent.

In early 2023, Netflix plans to roll out a “considered approach to account sharing monetization,” beyond its initial test markets in Latin America, the company said in October. This will encourage password sharers to create sub-accounts (“additional members”) and to pay fees to people outside their home. Recent headlines about the initiative — “The End of Netflix Password Sharing Is Near” (Wall Street Journal) and “The End of Free Netflix Password Sharing Is Coming” (CNET) — have made it seem as though the company will start enforcing the account sharing rule with punitive measures. In fact, Netflix’s password sharing monetization plan is mainly based on the honor system.

Netflix has not disclosed the cost of an Extra Member sub-account in the US or other new markets. In Chile, Costa Rica, and Peru, these fees were 23%-29% of the Netflix Standard two-stream plan, which indicates that sub-accounts in the US can cost between $3.50 and $4.50 each. In the three test markets, Netflix notified members who appeared to be sharing their accounts outside their home (detected based on data such as IP addresses, device IDs, and account activity from devices registered to the Netflix account) about new payment options. Netflix also required users to verify their credentials by sending a verification code to the primary account holder.

What if the customer does not pay for the password Piggybackers? All indications are that the most aggressive Netflix in getting into the first iteration of the paid share rollout is continuing to nudge offenders with email reminders and notifications.

The company’s help page on password sharing currently says, “Netflix will not automatically charge you if you share your account with someone who doesn’t live with you.” This is unlikely to change in the near future. If Netflix were to automatically charge a new fee for account sharing, besides pissing off customers – who have been involved in password sharing for years with Netflix wink and nod approval – It would attract scrutiny from regulators over potential billing practices against the consumer.

The fact that Netflix’s password-sharing monetization strategy is on an opt-in basis highlights the uncertainty of how much extra money it will make from the so-called “campaign”. The company is keen to develop new revenue streams as core subscriber growth slows (and actually shrank in the first half of 2022). In addition to monetizing paid engagement, Netflix has been struggling this year to launch a new, cheaper ad-supported plan in November; It seems to be a relatively slow start.

Netflix has estimated that passwords are being shared in violation of its rules with more than 100 million unpaid households around the world — but it clearly won’t be able to turn all that activity into revenue. Wall Street firm Quinn estimated that Netflix’s paid syndication program could add approximately 15 million paid participants and 1 million new members in the United States and Canada in 2023, representing about $721 million in UCAN incremental revenue annually (5.1 million). % compared to the previous analyst (estimates). It’s based on a survey of consumers that Coin conducted in August 2022, asking Password participants if they’d pay an extra $3 a month; 50% of respondents said either they or the primary account holder would. Needless to say, however, there is a difference between what people Say They will and what they do In fact an act.

Meanwhile, Netflix has been rolling out additional features designed to encourage password users to do the right thing and pay for legitimate account access. This fall, it added the ability for subscribers to switch user profiles into separate new accounts and a dashboard to allow users to log out of individual devices remotely.

“We’re never going to put something like a ‘noose-hole’ on people who share passwords,” Reed Hastings, co-CEO and co-founder of Netflix, said in the company’s Q1 2021 earnings interview. “I have to feel it makes sense for consumers to understand that. Of course, Hastings once insisted that Netflix would never launch an ad-supported plan, so – never say never.

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