Netflix is proceeding with the announced crackdown on password-sharing with people who are not in the same household.
The change was announced earlier this year, and it started with a paid password-sharing offer in Canada, New Zealand, Spain, and Portugal. The same option is now being rolled out to Netflix users in 103 countries and territories.
How is Netflix going to perform this check, practically? The company collects and looks at user data, such as location, IP address, and devices. Users will be required to set their home location and check in periodically at the home location with all the devices in use. Password-sharing users not in the same household have two possibilities: either they create their own accounts, or the initial user can add extra accounts for an additional fee.
Netflix used to encourage its users to share their passwords with loved ones: in 2017, the company posted “Love is sharing a password” on their Twitter account. However, Netflix has been under pressure to keep growing users. After a couple of quarters of lackluster subscriber growth in 2022, the company decided it needed to find a way to monetize better its existing users. It launched a cheaper, ad-supported subscription that helped with growth in Q4 2022.
The experiment with paid password-sharing started in Q1 2023. It backfired in Spain, at least in the short term: Netflix lost more than one million users in the weeks following the introduction of the new policy. In Canada, on the other hand, the total number of subscribers grew over Q1 2023, and revenue growth is accelerating.
We expect similar dynamics worldwide, but overall, the move should be favourable in terms of revenue growth for Netflix, which says that, at the moment, about 100 million households share their accounts globally.
Netflix has by far the largest viewing time compared to competitors: according to Nielsen data for 2022, users, on average, have watched Netflix more than five times more than its closest competitor, Disney+. This change could partially shift that dynamic, especially as most competitors are much less stringent about password sharing with other accounts. Hopefully, the company with the better content will win the streaming race.
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