This is news that many families won’t be happy about: Netflix bans free account sharing, the practice of allowing someone outside the home to create a profile on a loved one’s account and take advantage of it for free at home. The impact of this decision is huge: account sharing is a very widespread, even common practice, as the streamer states that it allows more than 100 million households in the world not to pay for access to the platform. With Netflix claiming 221.6 million subscribers worldwide, account sharing accounts for 31% of households using Netflix!
Netflix under pressure after losing 200,000 subscribers in Q1
The shortfall is real for Netflix. Especially as growth has slowed in recent quarters. Users appear to have peaked and exceeded in the United States and Canada, the home markets, and growth in Europe is slowing. In the first quarter of 2022, Netflix even lost subscribers for the first time in 10 years, 200,000 exactly.
Admittedly, this drop is strongly linked to the war in Ukraine, which saw Netflix withdraw from Russia and thus gave up 700,000 subscribers, meaning the platform would have gained 500,000 subscribers without the conflict. But Russia is rather the tree that hides the forest, as Netflix has also lost 600,000 subscribers in the United States and Canada. Only the Asia zone is growing, with a gain of 1 million subscribers. Following these disappointing results, Netflix stock fell 24% in the stock market, as the markets expected a total increase of 2.5 million subscribers.
In other words, Netflix can no longer afford to sit on the subscriber and revenue leverage that account sharing represents. Especially in such a competitive landscape, with the arrival since 2019 of Disney+, AppleTV+, Paramount+, HBOMax and Peacock in the United States, which are added to Amazon Prime Video and Hulu in the United States, and to Canal+ Series, OCS and Salto in France. All very serious competitors, with strong ambitions.
Towards a surplus of a few euros per extra “share account”?
So how can we monetize this pool of 100 million households? Netflix doesn’t seem to choose the difficult option, which is to completely ban account sharing and force such users to pay for a subscription. A relevant decision: many of these users are students or modest families, who probably would not have the means or desire to pay a full subscription, even the lowest of 8.99 euros per month.
Salvation may therefore come from overcharging. Since the beginning of March, Netflix has launched tests in South American countries (Chile, Costa Rica and Peru for the time being) to charge its customers for adding additional profiles to their account. But this surplus also makes it possible to transform what until now was only a simple profile into a real sub-account.
The principle: Standard (13.99 euros per month) and Premium (17.99 euros per month) subscribers can add up to two “subaccounts” to their main account. The difference with a simple additional profile? Each sub account has its own username and password, which means that the owner of the main account cannot access it. If they decide to pay for their account themselves or if the primary user no longer wants to pay for the sub accounts, secondary users can transfer their list, watch history, and personalized recommendations to their new account.
To determine whether an account is shared by multiple households, Netflix uses the IP address and device IDs. So it is not possible to share your password with someone outside the home, because the device identifiers and the IP address allow Netflix to understand that they are in fact different users.
The streaming giant plans to generalize this system in its major markets within a year. It now remains to set the value of the additional costs: in Chile and in Costa Rica, users pay the equivalent of 2.70 euros per additional subaccount. In Peru, Netflix has set it at 1.90 euros.
Cheaper plans and video games as opportunities for diversification
Faced with a slump in sustainable growth – a loss of 2 million subscribers expected in the second quarter – and fierce competition, Netflix could also end its policy of continuously increasing subscription costs, which is not only sustainable in times of growth and hegemony over competition.
During a conference call with analysts, Netflix co-CEO Reed Hastings revealed that the platform is considering the idea of offering new cheaper plans in 2023 or 2024, with advertising. A real surprise: Netflix had until now always refused to integrate advertising into its offerings because it positioned itself as a break from traditional television, funded largely by advertising revenue.
But Netflix, which offers some of the most expensive subscription plans on the market ($8.99 for the basic plan, $13.49 for the standard plan, $17.99 for the premium plan), needs to diversify its revenue streams. “VSconsider us quite open to the idea of offering even lower prices with advertisements to give consumers a new choice”said the leader.
This mixed model, half subscription, half advertising, had hitherto been adopted by market challengers. The last to arrive in the United States, Peacock (NBC Universal’s giant streaming service), chose it to try to gain a foothold in the market faster by offering a $4.99 per month deal that gives access to all content on its platform, but with ads.
Finally, Netflix has also entered the world of video games, which could increase the time spent on the platform and be a loss leader when it comes to subscribing. The platform has been offering a few games on its service since last November, some of which are inspired by the universe of its great success, the series Weird stuff† In September, she bought her first video game studio, Night School Studio, a California startup.
