In a move that surprised many industry watchers and dismayed many subscribers, Netflix finally cracked down on password sharers. Although the initial backlash suggested that Netflix might regret the decision, Netflix’s controversial crackdown on password-sharing practices has actually resulted in a substantial boost in subscriber numbers.
Netflix’s new policy asks subscribers to pay an additional $7.99 a month to share their accounts with up to two people that live outside their household. The changes sparked a flurry of activity in the United States, where password-sharing was very common if normal. The company justified the crackdown by explaining that some shared accounts were being used as much as the main account owner, suggesting a strong potential for converting these users into paying subscribers.
Netflix implemented the changes last May and it didn’t take long for it to have an effect, as per Antenna, a data analytics company.
Netflix recorded 100,000 daily new subscribers on May 26th and May 27th, marking a 102% increase over Netflix’s previous 60-day average. These sign-ups were higher than those during the COVID-19-related lockdowns when streaming services enjoyed a significant surge in popularity.
However, the new policy did not come without a cost. There was an increase in membership cancellations as well, though this was not sufficient to offset the overall surge in new membership sign-ups. Despite the risk of a “cancel reaction” that Netflix had anticipated, the data from Antenna suggests that the number of new sign-ups significantly outpaced cancellations.
In response to the password-sharing crackdown, some subscribers chose to pay the additional fee to add family members to their accounts, while others canceled their subscriptions. This mixed reaction mirrors the diverse user base that Netflix serves. However, the company seems undeterred by these initial reactions, confident in the long-term benefits of their decision.
Netflix’s co-CEO Greg Peters suggested during an earnings briefing that these changes could help the company increase its revenue by converting shared account users into paid account holders. The results so far appear to validate this prediction. Prior to the changes in the U.S, Netflix had rolled out similar policies in several countries, including Canada, New Zealand, Portugal, and Spain. The company reported that its subscriber base in Canada was now growing faster than in the U.S.
The preliminary success of Netflix’s password-sharing crackdown offers insights into potential future changes for streaming platforms. Despite the initial backlash from users, Netflix’s move may signal a shifting trend in the industry. Other platforms may follow suit, banking on the potential financial gains of cracking down on shared accounts.
Netflix appears to have found a delicate balance in its fight against password sharing. The company generated an uptick in subscriptions without alienating a significant portion of its existing subscriber base. As the dust settles on the initial shock of the policy change, and as Netflix prepares for its first earnings report since the crackdown, the industry waits with bated breath to see whether the initial success will continue.
Despite the initial controversies, Netflix’s decision appears to have paid off in the short term. With its subscriber numbers looking healthy, the streaming service has proven its resilience and adaptability in an ever-changing market. But the true test will be whether the platform can sustain this growth in the longer term, and if other streaming services will follow in Netflix’s footsteps.
With Season 3 of The Witcher and Rebel Moon hitting Netflix later this year, it won’t surprise us if the streaming platform will be able to maintain the recent surge.
