Netflix estimates that around 100 million use their streaming service without paying for it. Now the company is planning to ask her to pay too. The first attempts are already underway.
André Bissegger / ch media
The streaming boom during the pandemic made Netflix the winner of the crisis, now the industry pioneer himself is in crisis. The number of users is declining for the first time since 2011 and the downward trend is set to increase. Time for action: Netflix wants to crack down on users who share their credentials.
Netflix wants all users to pay for their passwords in the future.Image: shutter
What bothers Netflix?
Customers who share their login details are a thorn in Netflix’s side. No wonder, because there is a lot of money at stake. The service estimates that more than 100 million households are free-riding. When growth was still high, you turned a blind eye, founder and co-boss Reed Hastings said. Also, sharing was encouraged or at least taken with humor. The following tweet shows it in response to a free subscription offer for six months:
The following tweet from Netflix, which literally encouraged sharing, is also legendary. The provider used it to advertise the internal “Love” series.
What is the background?
Netflix had its first quarter of declining subscribers in more than a decade. By the end of March, some 200,000 paid subscriptions had been lost. Instead of the expected 2.5 million new customers, the number of users worldwide dropped to 221.6 million at the end of the quarter.
Investors were disappointed: the stock lost nearly 40 percent on the day of the announcement. Netflix’s biggest one-day stock market drop since 2004 fell by more than $ 50 billion, pushing the stock to its lowest level in over four years.
What is Netflix up to?
Netflix no longer wants to stand by and ask free riders to pay. “For example, if you have a sister who lives in another city and you want to share your Netflix subscription with her, that’s great. We’re not trying to stop that,” said product manager Greg Peters. “But we’ll ask you to pay a little more for it.” For example, Netflix can use IP addresses to determine where users are accessing the service from.
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What threatens Swiss customers?
Trials are currently underway in Chile, Costa Rica and Peru. This shows what it could look like in Switzerland in the future. Users are offered two options, as Netflix wrote in a blog:
- Subscribers can add sub accounts for up to two people they don’t live with. They receive their own profile with login and password, as well as personalized recommendations and at a significantly lower price. In Costa Rica, for example, full access costs $ 2.99.
- People who have previously used someone else’s login can transfer their profile data to a payment model. Your history, lists and personalized recommendations will remain intact. A monthly subscription costs between CHF 11.90 and CHF 24.90
Product manager Greg Peters said it could take another year for the system to be up and running around the world.
How are other streaming services reacting?
Sharing passwords is also common practice with other providers. According to the American Advertising Research Foundation (ARF), approximately 45% of Disney + users share their passwords with family or friends, just slightly less than 49% of Netflix. You can create up to five profiles for people from the same household per Netflix account. Depending on your subscription, you can watch up to four devices at the same time, like with Disney +. You can create up to seven profiles with Disney +. Apple TV can be shared by up to six family members.
Market research firm Parks Associates estimated last year that American streaming services lost about $ 2.5 billion in revenue in 2019 due to shared passwords. By 2024, the amount could rise to 3.5 billion. Disney + or Apple TV is unlikely to lose those amounts. They will be watching Netflix’s attempt in Latin America closely as a result.
What is Netflix planning next?
To restart growth, Netflix is also willing to shake one of its biggest taboos and introduce a cheaper subscription with interspersed ad clips. Netflix has never seen anything like it – Netflix co-CEO Reed Hastings has had little for it so far. Although he’s still a fan of the simplicity of subscriptions, “I’m even more of a fan of giving consumers the choice,” he said.
Netflix is now open to the advertising model. “We are looking into it and trying to fix it in a year or two.” Details such as advertising personalization can also be left to others.
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