Netflix Password Crackdown May Be “A Net Positive In The Long Term,” Analyst Claims

Bruce Haring
·3 min read

An analyst claims the decision by Netflix to better police password sharing could be beneficial to the streamer in the long run.

Netflix sent a message this week to some accounts with multiple users, threatening them with a service cut-off if illegally sharing passwords but offering the incentive of a free 30-day trial in certain territories. The message read: “If you don’t live with the owner of this account, you need your own account to keep watching.”

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Netflix said the move was “designed to help ensure that people using Netflix accounts are authorized to do so.”

Research company Magid claims 33% of Netflix users share their password with at least one other person. That led one analyst to cheer the attempt to cut-off the freeloaders while discounting the negative fallout from such actions during a pandemic that has left many stuck at home and unemployed.

“It’s pretty difficult to estimate the impact that it would have, but my sense is that it would be a net positive in the long term because I think the number of password sharers right now is a fairly meaningful number,” CFRA Analyst Tuna Amobi told Yahoo! Finance.

“There would be some immediate negative impact in terms of churn. But it’s very easy to see how some of that impact would cancel out in terms of potential uptake from certain customers who were affected,” he said.

Amobi suggested the crackdown was a loyalty test that could nudge those getting the service for free to subscribe themselves.

Netflix is far from needy. The company’s revenue in the fourth quarter of 2020 totaled more than $6.64 billion US, up from just over $1.18 billion in the corresponding quarter of 2019. Netflix estimates it will spend $19 billion on content this year.

However, research firm Parks Associates, in a report earlier this year, pegged overall losses by streaming services from password sharing at $9.1 billion, projecting that the figure will reach $12.5 billion by 2024.

“It does come with some risks, but I believe it wouldn’t be radically different from what some of the other service providers are already doing right now,” Amobi added. He cautioned that “family users” should be handled gently, but added, “Hopefully they can figure out something to track the real abusers, but this isn’t rocket science. There’s always been a solution to this, but I was surprised it took them this long to get around to it…I thought it was overdue.”

The number of accounts able to simultaneously stream is factored into the price of subscriptions. The Basic $9 plan allows only one device to stream, while the Standard plan at $14 doubles that and the Premium level expands it to four devices. Netflix’s terms of service say a subscription is “for your personal and non-commercial use only and may not be shared with individuals beyond your household.”

The potential crackdown has implications beyond just the sharing of passwords. It is considered an account verification test, so it could also be used for security or anti-fraud measures. Netflix is famous for conducting hundreds of A/B tests a year among its more than 200 million global subscribers, for a wide suite of product features and monetization tools.

Dade Hayes contributed to this report.

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