The consternation generated by the news that Netflix would begin stopping its users from logging into the service using shared passwords was palpable. But despite some catastrophic predictions on how many customers would depart from Netflix if the ability to share passwords was restricted, the company added 8.7 million new subscribers in the third quarter of 2023, and seemingly hasn’t slowed down one iota.

• Netflix first began to crack down on password sharing in the United States in May.
• The company saw more former sharers sign up for an ad-free plan than the ad-supported plan initially, but that trend has started to turn around.
• The rollout of password-sharing rules has come in stages, so customers who have not been affected yet will be sooner or later.

One Size Doesn’t Fit All

As part of Netflix’s conference call to share more about its earnings report with Wall Street analysts, company co-CEO Greg Peters discussed the success of Netflix’s password-sharing rules thus far. The company saw record-setting sign-ups in the days following the announcement that rules against account sharing were going into effect, but not all users saw their ability to log into another’s Netflix restricted at the same time. Peters said that a staggered launch of the rules was always Netflix’s plan and that customers who hadn’t seen the new rules enacted yet would soon.

“Our plan has been to stage out this rollout,” he said. “We’ve been delivering our product experience to different borrower cohorts according to that plan. And as a result, there are a number of borrower cohorts, which has, as of today, have not received part of that experience.”

Peters explained that part of the reason not all users saw the password-sharing crackdown at the same time was technical; rolling out such a big change to 200 million+ users at once would have been prohibitive. But the launch strategy was also intended to ensure that users who needed more time to be convinced that getting their own account was a good idea would get that time.

“Part of [the strategy] has been just to stage things out based on borrower behavior,” Peters expounded. “So we want to show up with the right product experience at the right moment. That’s more likely to convert a borrower over rather than have them spin-off. So we want to think about that from maximizing long-term revenue.”

The spread of rules against password sharing will continue over the next few quarters, which will help the company spread out subscriber acquisitions thanks to the rules. Peters was also sure to note that much of Netflix’s growth during the past quarter was not due to the new password-sharing restrictions but was organic instead.

Standard with Ads on the Rise

One unintended consequence of Netflix’s password-sharing rules is that customers who were formerly borrowing login credentials from a paying customer were more likely to adopt an ad-free plan than the cheaper Standard with Ads plan. Netflix discontinued its cheapest ad-free plan — called “Basic” — for new subscribers in July to help remedy this issue, and the third quarter saw the number of users picking the Standard with Ads plan increase.

More customers could be headed for the ad-supported plan in the near future, as well. In addition to rolling out restrictions on account sharing to more customers, Netflix has announced it’s raising prices for the customers who still have the Basic plan, as well as its most-expensive option the Premium plan. There’s a good chance Netflix will see some of these users downgrade to a less expensive plan, and the Standard with Ads option is there to catch the most price-sensitive customers before they churn away.

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Netflix is a leading subscription-based video streaming service that offers on-demand access to an extensive library of over 3,000 movies, 2,000+ TV shows, and a growing collection of acclaimed Netflix originals. Renowned for producing groundbreaking content, Netflix has become a cultural powerhouse with hit originals like “Stranger Things,” “Wednesday,” “Squid Game,” “The Crown,” “Tiger King,” “Bridgerton,” “The Witcher,” and “Black Mirror.”

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The platform constantly updates its catalog, introducing fresh content alongside timeless classics and international hits. Netflix’s commitment to storytelling has also earned critical acclaim, with award-winning exclusives such as “Roma,” “Marriage Story,” “The Power of the Dog,” “Mank,” and “Ma Rainey’s Black Bottom.” In 2023, their animated film “Guillermo del Toro’s Pinocchio” won an Academy Award for Best Animated Feature, further solidifying Netflix’s reputation for high-quality content.

Recently, Netflix has expanded beyond standard movies and TV titles with the addition of video podcasts, and is also exploring a digital store that would offer third-party streamers within the app.

Netflix offers three plans – stream on 2 devices in HD with the “Standard with Ads” ($8.99) plan, on 2 devices in HD with the “Standard” ($19.99) plan, and 4 devices in up to 4K on the “Premium” ($26.99) plan.

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