Netflix will soon charge primary account users an extra fee for any users outside their household in an upcoming test that cracks down on password-sharing. The company has, in many respects, changed the game for media consumption ever since it first arrived in 1997. Netflix's business model of offering streaming, which began in 2007, fundamentally altered the traditional broadcast television and film by offering titles through SVOD and triggered a streaming war with a multitude of new arrivals. Last year, total global streaming subscriptions surpassed a staggering 1 billion subscriptions, with the Netflix behemoth reigning supreme among them. In January of this year, the streaming service announced that it will be raising its price from $13.99 to $15.49 per month for the standard plan, which makes it the most expensive streamer just above HBO Max's price point of $15/month.
Last year, Netflix similarly integrated an account verification tool to try and cut down on password sharing, although users were sometimes able to circumvent the tool and allow others to use their accounts by simply sending them the confirmation code, for instance. In the US and Canada combined, Netflix reports around 75 million subscribers. Globally, that number is around 222 million, but other streaming competitors are quickly closing the gap on Netflix's lead with their aggressive franchise offerings and price-cutting. For instance, Disney, which offers Disney+ priced at only $8/month and also majority-owns Hulu, closed out 2021 with 179 million total subscribers across platforms. Disney+ alone surpassed 100 million subscribers this time last year after only launching a little over a year prior. Netflix's returns last year were a bit disappointing for what has been widely understood as the streaming king, likely due to the intensity of its more recent competition which has only further heightened since viewership models have changed during the COVID-19 pandemic. In order to stay on top, Netflix must continue to produce attention-grabbing and often costly titles, and its users might soon feel the squeeze.
As reported by Variety, in a test announced by Netflix's Director of Product Innovation, Chengyi Long, Netflix primary account holders in Chile, Peru and Costa Rica will now be prompted to add additional viewers to their account at a discount, while users who may not be the primary account holders will be able to transfer their viewing profiles to either create a new account or be added to someone else's (again, at a new additional cost for primary account holders). Should this test be successful in these countries, Netflix may expand the method worldwide in an effort to squash streaming freeloaders once and for all and to boost their subscriber base. Long had this to say about the company's new strategy:
"We’ve always made it easy for people who live together to share their Netflix account, with features like separate profiles and multiple streams in our Standard and Premium plans. While these have been hugely popular, they have also created some confusion about when and how Netflix can be shared. As a result, accounts are being shared between households - impacting our ability to invest in great new TV and films for our members."
This news comes off the heels of a particularly bad year for Netflix as they've had their lowest rate of subscriber growth since 2015 by the close of 2021. In a letter to shareholders sent out in January of this year, the streamer acknowledged that they were feeling the heat, saying: "consumers have always had many choices when it comes to their entertainment time - competition that has only intensified over the last 24 months as entertainment companies all around the world develop their own streaming offering." The streamer has also announced its expansion into the lucrative video game business which will likely differentiate them a bit and offset some shrinking pool of potential subscribers. With the announcement of this new test, Netflix is signaling its lack of patience for streaming freeloaders as politely as possible – but the message is clear.
It's a bold move to begin this test so shortly after the announcement of an additional price hike. While streaming, in general, has experienced a boom due to viewership habits over the course of the pandemic, the playing field does seem to be trending toward leveling, and this may be Netflix's attempt to keep its lead by essentially transitioning out freeloaders into new users. However, with inflation and hiking gas prices at the back of every consumer's mind, it's difficult to predict how Netflix's consumer base might react to such news. It's a gamble the company well known for being cut-throat in terms of its business strategy is willing to make to maintain Netflix streaming supremacy, at any cost.
Source: Variety