“We love people sharing Netflix, whether they’re two people on a couch or 10 people on a couch. That’s a positive thing, not a negative thing.” These were the words of Netflix CEO Reed Hastings at the CES show in Las Vegas. That was in 2016. Six years later, Netflix isannouncing plansto end password sharing.
Last year, Netflix startedtesting a prompt systemthat would ask users to verify their phone number or email, in order to verify that they live in the same household as the person paying for the subscription. The test was not particularly well-received.
Whenaskedabout it, COO Gregory Peters noted that the company wants to make sure that people who are accessing a Netflix account are authorized to do so. Hastings, on the other hand, claimed that Netflix “would never roll something out that feels like turning the screws” on account sharing.
Evolving needs of a platform
It can be anyone from a friend or an ex to a friend’s friend that doesn’t really care who is leaching off on their Netflix subscription. Netflix wants the mooch to pay for its content. And as funny as that sounds, it comes at a serious cost. As per analyst estimates, Netflix alone islosingabout $6 billion each year in revenue due to account sharing.
Necessity and risks
But it’s not a one-way road. In a world where content is scattered across a bunch of streaming services, subscribing to all of them comes as a serious hit to a single person’s wallet. Sharing a Netflix account with another person who only has a Hulu or Prime Video subscription makes things easier for both parties.
Plus, theprice hikesfor Netflix plans — and rival platforms, too — have further bolstered the incentive for account sharing. Netflix’s terms of services prohibit account sharing “beyond households,” but there isn’t a systematic punitive action to be enforced. On the legal side, password sharing was classified as afederal crimein a court ruling back in 2016. Tennessee evenpassed a lawagainst password sharing in 2011.
And then are the cybersecurity risks that come hand in hand with password sharing. People tend to re-use the same password for different streaming services, and this opens the doors for a rising threat commonly known as credential stuffing. Disney+ is the bestexample, which had thousands of accounts pop up for sale on the dark web soon after the service went live.
Password sharing is not an alien concept
S&P Global’ssurvey suggests that the percentage of Netflix users sharing a password has hovered around 10% for the past three years. A study byThe Manifestfound that nearly 37% of users share their streaming passwords with people they don’t live with.
In 2018, media research firm Magid toldCNBCthat 35% of millennials share passwords for streaming services. AComparitechsurvey from 2021 found that nearly 45% of Netflix users share their passwords, with millennials constituting the highest share of that figure.
The plans ahead
Netflix is running a test that will allow users to add up to two sub-accounts for people they don’t share a household with, but allow access to the main account. The sub-account will have its own profile, recommendations, and login credentials. The incentive for creating a sub-account is that it will only cost $3 to do so in Costa Rica, one of the test markets alongside Peru and Chile.
The other option is to transfer the profile of a freeloader to an entirely new account, with all the associated data such as My List, recommendations, and viewing history in tow. This facility will be available for Netflix’s Basic, Standard, and Premium subscription tiers. Why is Netflix doing this? To fund content production and make up for the lost revenue.
Netflix’s Director of Product Innovation, Chengyi Long, notes that password sharing is impacting the platform’s ability to “invest in great new TV and films” for its audience. Netflix is going to do the soak test in the three aforementioned countries and based on how it is received, plans for international expansion will follow.
Compared to rivals, a Netflix subscription has become more of a digital entertainment necessity for cutting the cord than just another subscription relegated to the barely-used bin. And that puts Netflix in an even stronger position to finally tighten the screws on account sharing. But instead of kicking moochers away, Netflix is actually baiting them with a lower subscription fee to stay hooked as a sub-account. Sounds like a win-win strategy for everyone.
