Even Record-Breaking Subscriber Increases Doesn’t Mean Netflix’s Password Sharing Crackdown is Successful Yet
Amidst much wailing and gnashing of teeth by users, Netflix’s rules against password sharing are now official. Although various research firms produced studies that showed Netflix stood to lose a big portion of its customer base when it finally cracked down on password sharing, reality has been far kinder to the service than predicted.
In fact, Netflix’s efforts to curb password-sharing are going better than just about anyone could have expected, likely including internal hopes for a good result. Netflix saw record-setting signups on both May 26 and 27, amidst its four single-largest customer acquisition days in the United States since at least 2018.
However, Parrot Analytics Director of Strategy Julia Alexander noted that the seemingly impressive statistics shouldn’t come as a surprise, given how the world’s largest stream rolled out the new rules.
More interesting to me will beratio between average sub acquisition rates (especially post initial crackdown) and average churn. The increase in subs was expected; most people who complained still want Netflix. And churn may not be as impactful because sub acquisition offsets. https://t.co/i1dH9Tw051
— julia alexander (@loudmouthjulia) June 9, 2023
Although the increase is clearly good news for Netflix, a big decrease in customers was never all that likely, at least at first. The streamer didn’t attempt to charge customers more to use the service they were already paying for. Therefore, Netflix made it easy to simply force non-paying users to fend for themselves. Of course, subscribers are able to continue paying for others outside of their households by paying an extra $7.99 per month.
The flood of new signups indicates that Netflix made the smart play in making it more expensive for sharing users to continue giving out their passwords than it is to simply have the extra members sign up for their own accounts. Netflix’s Standard with Ads plan comes in at $6.99 per month, so it’s cheaper for people using someone else’s Netflix to get their own account than it is for the original account holder to continue paying to keep them on.
Hundreds of thousands of new subscribers are wonderful from Netflix’s point of view, but the company knows full well that its true goal is to see its average revenue per customer (ARPU) increase. That figure indicates how much profit Netflix is pulling in per user, and it’s the new gold standard that streamers are measured by when Wall Street investors are determining the health of a company.
The good news for Netflix in this capacity is that users who are deciding to sign up for their own ad-supported accounts will drive that ARPU upwards quickly. Even at a lower subscription cost to users, ad-supported streaming tiers generate much more revenue per customer than ad-free plans, thanks to the extra infusion of money from advertisers. That’s why some research firms think Netflix could stand to gain as much as $3.5 billion in additional revenue by the end of 2024 from its efforts to stop password-sharing.
All available data shows that Netflix’s password-sharing crackdown has been a success thus far. More information is needed before ultimate victory can be declared by the world’s largest streamer, but you can be sure other services are paying close attention. Even Prime Video will have an ad-supported tier soon, and it’s a good bet that other streamers will introduce rules against password sharing now that they will all have a plan with ads to drive users to in the near future.
Netflix
Netflix is a subscription video streaming service that includes on-demand access to 3,000+ movies, 2,000+ TV Shows, and Netflix Originals like Stranger Things, Squid Game, The Crown, Tiger King, and Bridgerton. They are constantly adding new shows and movies. Some of their Academy Award-winning exclusives include Roma, Marriage Story, Mank, and Ma Rainey’s Black Bottom.