Netflix’s Password-Sharing Crackdown ‘Working’; Many Borrowers Behave Just Like Longtime Subscribers
Netflix would probably like to stop talking about its anti-password-sharing rules soon. Rules against sharing accounts were officially rolled out in the United States in May, and company executives were asked plenty of questions about the new policy during Netflix’s conference call to discuss its second-quarter earnings on Wednesday.
“We’re seeing that it’s working,” Netflix co-CEO Greg Peters said of the account-sharing crackdown. “We’re positive in terms of both revenue and subscribers relative to prelaunch in all of our regions. But I also think it’s important to note that the business impacts of that product experience will roll in over several quarters.”
Peters also gave some veiled insight into who amongst former account borrowers has been most easy to convert to paying customers. He explained that some users who had been borrowing accounts acted just like longtime subscribers — engaging with the service often and churning at a lower rate — and that these were the users who have converted to paying customers most often.
“I would say, generally, what we see is these are well-qualified members,” Peters said. “So in other words, they are choosing plans and are engaging at rates, have retention characteristics that generally look like higher tenure members, that’s good because they are well qualified, that retention is quite good in essence. So that’s a broad way to think about what those borrower cohorts are. And that’s consistent also with the fact that we’ll convert essentially those most engaged, most well-qualified borrowers first. That’s a general way to think about it.”
He also acknowledged that users who accessed a borrowed account less frequently will be harder to convert to paying customers. Peters declined to share how many former borrowers had signed up for new accounts thus far, but there’s reason to believe the number is not staggeringly high yet.
One reason is the fact that Netflix announced this week that it was shutting down its Basic plan in the United States, the cheapest ad-free tier the service offered. This makes former borrowers all the more likely to funnel to the Standard with Ads plan, which at $6.99 per month is now less than half the cost of the ad-free Standard plan. If Netflix was seeing a large number of borrowers making their way to Standard with Ads already, it’s possible the company would have delayed the elimination of the Basic tier.
Standard with Ads will more efficiently monetize new users than the Basic plan did — due to its combination of subscription and advertising revenue — which is why Netflix is so eager to sign up new customers to that option. Despite the customer angst, Netflix saw record sign-up days after introducing its rules against password sharing, demonstrating the most devoted borrowers immediately saw the value of having accounts of their own. There’s more work to do, but the success of Netflix’s password-sharing rules thus far must have other streaming services closely examining their own policies regarding account sharing.
Netflix
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