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Study: Netflix Password-Sharing Crackdown Could Lead to High Subscriber Churn

Christian Bastian

There was a time when Netflix encouraged subscribers to share their passwords with friends and relatives not living under the same roof, but as the company has started to see their subscriber numbers decline, they have begun to experiment with ways to monetize viewers who use the service for free.

After starting with a test in three Latin American countries in which they encouraged subscribers to pay a little bit more for other people to use their account, last week, the streamer signaled that it would begin expanding the practice in the coming months.

However, results of a survey conducted by home-media research firm Aluma said that a proposed charge of $3 for each user outside of a subscriber’s home could see 13% of Netflix account holders cancel their service if implemented in the U.S. This comes after an announcement by Netflix that they lost 636,000 domestic subscribers in the first quarter of 2022.

“We believe concerns of subscriber exodus due to restricting illegitimate password sharing exceeds the reality, especially if the value of a service is sufficiently high and the means of restriction sufficiently elegant,” Aluma said in its report.

According to the survey, if such charges were introduced in the U.S., 13% of adult Netflix heads-of-household would cancel service, while 12% would add at least one $3 per month additional user. Of the households most likely to cancel, 48% would make less than $50,000 per year — vs. 35% of Netflix users in general — and 66% would be single.

The report also indicates that those most likely to cancel would be amongst Netflix’s youngest subscribers with 56% of those canceling falling between the ages of 18 and 34; for context, that demographic only makes up 38% of total Netflix’s total subscriber population.

Watch 20.0 hours of streaming video on TV each week (vs. 16.4 for the average Netflix user)

As part of its Q1 2022 quarterly earnings report, Netflix stated that they believe that more than 100 million households worldwide are using a shared password that they don’t pay for, including 30 million in the U.S. and Canada along. Netflix’s plan to capture some of that lost revenue would start with an alert being sent to account holders whose passwords are being used by other households, and then providing them the option to add sub-accounts to continue allowing the out-of-home usage.

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