Netflix’s crackdown on password sharing seems to be working
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In economic journalism, we tend to spend a lot of time talking about business plans that fail. Call it our version of “if it bleeds, it leads.”
But we want to call attention to a strategy that seems to have succeeded: You might remember when Netflix started cracking down on password sharing a couple of weeks back. The streaming company started charging users for sharing accounts from different households and limiting the number of users on accounts.
Analytics firm Antenna says that in the days following the start of the crackdown, Netflix saw a big jump in new customers.
The last time Netflix saw a spike in subscribers anything like this was at the start of the pandemic, according to Brendan Brady of Antenna, which has been keeping track since 2019.
“The bump is actually bigger than the bump that they got during COVID in terms of new signups,” he said.
Cancellations spiked too, but Netflix more than offset the losses by racking up 100,000 signups per day in the last week of May, “which is a lot for such a mature service,” Brady added.
In Philadelphia, Fred Price and his girlfriend get Netflix from her family. “I don’t actually pay the bill. Her mother pays the bill,” he said.
To keep sharing, she’s paying an extra $7.99 a month. “She updated the plan and that’s what we’ve been doing, so it’s working out fine,” Price said.
Netflix announced in February that it was cracking down because sharing was hurting its ability to “invest in great new TV and films.”
This is the same company that tweeted “Love is sharing a password” six years ago.
Ayelet Fishbach, a behavioral science and marketing professor at the University of Chicago’s Booth School of Business, thinks this was the plan all along: “Giving streaming basically for free to many people got people hooked.”
But other streaming services might not be able to follow Netflix’s lead, said Paul Hardart, a marketing professor at New York University’s Stern School of Business.
“I think they’d like to. I’m not sure they have the leverage,” he said. “They want people to try their product and use it, and see utility, and then be willing to pay. And a lot of them aren’t there yet.”
Despite Netflix’s success, some customers still aren’t sure they want to pay.
“I think the content on Netflix is worse than the content on Hulu and HBO,” said Taryn Dalius of Philadelphia.
She currently uses her aunt’s Netflix account and shares her own HBO Max subscription in exchange.
“I have a busy life,” she said. “I want to have something on in the background while I’m also shopping.”
Dalius said the password crackdown hasn’t come up yet. She doesn’t want to think about it until she has to.
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