Netflix is Tightening Password Sharing

Netflix is Tightening the Screws Around Password Sharing

Things used to be much simpler when you could let your friend borrow your Netflix and then forget about it because it didn’t matter. Well, no more. They’ve had a bad year and the number of subscribers dipped considerably. Now they’ve announced several measures including a crackdown on password sharing, which is already banned in a few places outside of the US like Canada.

More importantly, why is their subscriber count decreasing? It started as a video streaming company and later on branched out to producing original content. It has also produced some absolute bangers like The Crown, House of Cards, Mindhunter, Stranger Things, and more. The sheer joy of watching a good show in HDR over a fast internet like Quantum Fiber is priceless.

Netflix is Tightening Password Sharing

So then why are people turning away? Come, let’s find out.

The Backdrop

According to Yahoo News, Netflix was losing almost $6.25 billion annually because of password sharing. People who would buy the subscription just keep freeloading on their friends’ or family members’ accounts. Additionally, their subscription used to be cheap.

But the recent inflation has also affected them so they’ve jacked up their prices. A standard subscription would cost $7.99 in 2010, but it can go up to $19.99 nowadays. That’s also one of the reasons why people stopped subscribing.

Moreover, 2022 proved to be a tough year for them. According to CNN, Netflix lost around 2.4 million subscribers in the third quarter of 2022. If you add up the total lost subscribers count in 2022, the number is far greater than any streaming service would like.

This resulted in their stick plummeting, hundreds of layoffs, and a lot of uncertainty regarding the future of the streaming giant.

However, things slightly recovered in the next quarter when Netflix earned $1.4 billion in the second quarter vs $1.3 billion in the same time the year before that. However, experts believe it’s got more to do with the revised prices than anything else. If the prices were kept the same, the net revenue would be down.   

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Why is it Happening

Inflation is the first thing that’s negatively impacted Netflix’s revenues. People aren’t used to paying such prices to Netflix, especially when everything else they have to buy has also increased in price. Moreover, the revised price would be fine if password sharing were still a thing. One person would bear the price hike and the rest of the people in their circle would remain largely unaffected.

But that’s not the case anymore.

Secondly, experts believe that the pandemic gave way to Netflix’s rise since people were forced to stay home. There was little to do than watch movies and TV shows, which is what Netflix specializes in.

However, that extra subscriber count is now out in the world doing whatever they were doing before the pandemic. 

Netflix is Not the Only Player Anymore

Another reason for Netlfix’s decline in profits is the abundance of options in the market. Gone are the days when Netflix was the only one dominating the online streaming space. Now, we have a ton of different options backed by some of the biggest tech and e-commerce giants. You have Hulu, Amazon Prime Video, Apple TV, HBO Max, etc.

It’s not just the streaming services, customer trends are also changing. Podcasts have become increasingly popular in all age groups. If you want to listen to a podcast on a specific topic, all you need to do is head over to YouTube and look it up. YouTube doesn’t have to pay anyone from their own pocket.

It’s all run by ads and there’s no shortage of businesses with money so the system keeps thriving.

The same can’t be said for Netflix. Netflix hires actors and whole crews to make an original TV show with, let’s say, ten episodes. It has to spend millions to produce content that would potentially appeal to its subscribers, which is hit-and-miss. Sometimes the shows do well, and other times they don’t, and there goes money down the drain.

YouTube doesn’t pay anything and its top ten podcasters produce ten podcasts in probably a week that consume the same amount of time as the ten episodes in a TV show.

What Will Happen in the Future?

Reportedly, the streaming giant is also aware of the changing ground realities. It recently rolled out a basic plan that contains ads and costs only $6.99. It’s also planning to launch an even cheaper plan for people living in developing countries like Chile, Ghana, etc.

The company said that around 100 million people are currently using the service without paying for it. That’s about to change since it has already banned password sharing in Canada, and the US is next.

It also believes that content is king despite the growing number of alternate options. That’s why they’re focusing more on putting out better content to keep their customers engaged.

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This is why Netflix is tightening the screws around password sharing. Netflix still holds a major share of viewers in the streaming market with around 223 million subscribers. Whatever they do to increase their revenue impacts a lot of people, that’s why caution is advised.

It’s hard to imagine if this step will receive a warm welcome from all the users, but then again, you could always pay a little and watch the version with ads.

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