Netflix Password Crackdown

Coming 2023, streaming giant Netflix, released in their October shareholders letter, that they will begin cracking down on password sharing, requiring users to pay an additional fee on top of the subscription cost when their account is accessed from different locations.

It comes as no surprise. Announced back in their April 2022 shareholders letter, Netflix recorded losing subscribers for the first time in decades within the first quarter, including significant stock price drops. Estimating around 30 million households gaining access to Netflix through password sharing, Netflix needed a new strategy to combat this financial loss. As a way of compensating for the deficit, Netflix considered password sharing as an opportunity for revenue growth, with Netflix claiming its losses have affected the company's abilities to "invest in great new TV and films."   

Courtesy of Variety

Illustrated in Times, Netflix is currently testing this model of charging for password sharing in Costa Rica, Chile, and Peru earlier this year. Subscribers within these countries are able to add up to two extra members to their accounts for an additional $2.99, 2,380 Chilean pesos, and 7.9 Peruvian sol, respectively, each per month. Netflix, however, has not yet announced how much it is planning to charge for this service in other countries.

Now, password sharing isn't Netflix's first attempt at recouping its losses. Earlier this year, Netflix announced they were providing an ad-supported tier, "Basics with Ads," to their platform, costing $6.99 per month, slightly more than NBCUniversal's ad-supported Peacock and less than Hulu. "Basics with Ads," will provide users restricted access to the Netflix catalog and offers video quality up to 720p. The tier also won't allow users to download content, something present within Netflix's other packages. Rolling out November 3, 2022, Netflix believes this version will attract a new audience, with AdAge estimating half a million new subscriptions.  

Netflix has rebounded with its recent content, its serial killer drama Dahmer—Monster: The Jeffrey Dahmer Story, action movie The Gray Man, and new episodes of Stranger Things, establishing that providing captivating content is the most reliable source of attracting new subscribers, however, Netflix is taking every chance it gets as retaining views, even if it's a small percentage.