100 million people watch Netflix without paying. CEO Reed Hastings now wants to change that – and there should also be advertising on Netflix for the first time.
For years, non-paying users were tolerated, but now they want to be asked to pay, says Netflix CEO Reed Hastings.
Netflix access data is often passed on to families and friends as happily as a good recipe. The world’s largest streaming platform now wants to change that. In view of stagnating user numbers and growing competition from Apple, Disney and Hulu, the company from Los Gatos, California, now wants to ask “shadow users” to pay. Earlier this week, Netflix announced that password sharing will cost from 2023.
100 million additional viewers who don’t pay
Netflix has long known that paying subscribers often share access information with relatives, friends, and friends of friends – well beyond the five people who are currently allowed to share one account per household. Based on the IP address, the device identification number and the activity of an account, you know exactly which users belong to a household, according to Netflix. In the spring, Netflix announced that the 222 million paying subscribers worldwide would be joined by a remarkable 100 million people who use the service for free; more than 30 million of them in the USA and Canada alone.
As long as growth thrived, the 15-year-old company tolerated these shadow users. So far, so reported Wall Street Journal last year citing employees, no customers were punished because they shared their access data too freely. On the contrary, according to Netflix product chief Greg Peters, this practice has helped the platform grow because more and more people have tried and enjoyed the service.
The number of users is shrinking for the first time in ten years
But in the spring, after Netflix saw user numbers shrink for the first time in more than a decade, the company announced it would end password sharing. The platform lost almost 1.2 million paying subscribers in the first two quarters. This is due to new competing offers from other media companies and the end of the strict corona measures in many countries, after the pandemic was known to have brought Netflix a lively influx.
“When we were growing rapidly, password sharing wasn’t a priority for us,” said CEO Reed Hastings. “Now we are working very hard on the subject.”
In concrete terms, it should look like this: from 2023, Netflix users will have to set up sub-accounts for friends and family with whom they want to share their subscription. The company has not yet announced how much each sub-account will cost; the Platform Cnet estimatesthat it should be between $3.50 and $4 a month. It’s not about banning sharing in general, said product manager Peters, but about paying at least a little for the films that you like to watch.
How exactly this could look like in the future tested Netflix in Latin America in recent months. There, paying subscribers suddenly had to pay $2.99 more if Netflix had registered that other people with a different IP address were also using this account. Alternatively, these so-called “shadow users” were offered the opportunity to transfer their existing user profile to a payment model without losing their history of films and series they had already watched. However, the new offer was not well received by users in Latin America most recently the «Rest of World» platform reported, and caused criticism, especially in Argentina.
Exemplary character for other platforms
Other streaming providers should also take a close look at the changes made by the market leader. Because password sharing is common among users of all platforms and has been tolerated by all companies so far: According to the market research company The Advertising Research Foundation, for example, 45 percent of Disney+ subscribers share their access with relatives and friends, the second highest proportion after Netflix (49 percent). .
Providers like Disney+ and HBOMax sometimes email their customers when they see multiple hits from different locations. Officially, these emails are intended to ensure that an account has not been hacked. But like industry insiders told the Wall Street Journalthese e-mails are also intended as a gentle reminder to customers that they know when access is shared.
Market research firm Parks Associate estimates that American streaming services lost $2.5 billion in revenue in 2019 to shared accounts. “People got away with it for years,” says Neil Begley of Moody’s Investor Services. “Now that free is gone, most people won’t be angry with the company for claiming the revenue it’s entitled to.”
Netflix now with advertising for the first time
In addition, as announced in spring, Netflix is now launching a cheaper subscription with advertising. Beginning November 3, users in the US, Germany, and a number of other countries will be able to watch their series and movies punctuated by 15- to 30-second commercials for $6.99. However, users of this basic offer do not have access to the entire Netflix video library and they cannot watch the content offline on their devices.
Streaming services are becoming increasingly popular in the US. According to a survey According to the Leichtman Research Group (LRG), 83 percent of all households there have an active subscription to at least one of the 15 major providers. Streaming offers are only doing so far off less than 30 percent of the timethat Americans spend in total in front of the television.
The NZZ correspondent Marie-Astrid Langer follow on twitter.