Netflix’s Password Crackdown: New Subscriptions Allude to Success

Earlier this year, Netflix announced that their US customers would be the first to face a crackdown on password sharing, with Netflix notifying customers that this would start at the beginning of May. From what we can see, this change seems to have achieved the desired results, as early data indicates that the crackdown has converted “freeloaders” into subscribers.

Based on the most recent Atenna data, Netflix daily sign-ups hit 73,000 a day from May 25-28th, which is a 102% increase from the previous 60-day average. The data shows a significantly higher spike than when the pandemic started in March 2020.

Netflix also experienced a significant increase in cancellations over May 25-28 – a phenomenon that Netflix bosses told investors was inevitable when this change was announced – but the number of new subscriptions was still higher.

In the US (and soon to be the same in the UK), Netflix has informed its customers that members who don’t live with the account holder will have to pay an extra $7.99. Netflix has now gone one step further by telling customers that they will be blocked from the service if they attempt to share passwords outside of the household.

Amid worldwide economic uncertainty, it is clear, in our opinion, that Netflix should be able to deliver solid financial results by better utilising the 100+ million subscribers who had previously been “piggybacking” on a friend or family member’s account. Additionally, Netflix’s new ad-supported model, which has attracted a further 5 million subscribers, has contributed to improved financial results for the platform.

In another article discussing the shortening of the theatrical release window, we highlighted how streaming platforms are beginning to suffer due to a significant decrease in the diversity of revenue streams. Netflix is a prime example of this. In the early 2010s, Netflix could rely on both a plethora of original content and pre-existing content from companies like Disney, Lionsgate, Paramount and many more. However, this is no longer the case, as many of these companies joined the streaming wars only a few years ago. In our opinion, it is clear that Netflix had no option but to implement password crackdowns and ad-supported models to ensure the success and viability of the platform.

We eagerly await to see what these changes might mean for the British and European markets.