100 million households affected

This is news that many families will not like: Netflix will ban free sharing of accounts, the practice of allowing someone outside the home to create a profile on a loved one’s account and benefit from it at home, free of charge . The impact of this decision is huge: account sharing is a widespread, even widespread, practice, as the streamer indicates that it allows more than 100 million households in the world not to pay to access the platform. With Netflix claiming 221.6 million subscribers worldwide, account sharing affects 31% of households using Netflix!

Netflix loses subscribers for the first time in more than 10 years, the stock market plummets

Netflix under pressure after losing 200,000 subscribers in the first quarter

The deficit is real for Netflix. Especially because in recent quarters, its growth has slowed. The peak of users seems to have been reached and surpassed in the United States and Canada, in their domestic markets, and growth is slowing in Europe. In the first quarter of 2022, for the first time in 10 years, Netflix even lost subscribers, exactly 200,000.

It is true that this fall is closely linked to the war in Ukraine, which led Netflix to withdraw from Russia and therefore to give up 700,000 subscribers, which means that the platform would have reached 500,000 subscribers without conflict. . But Russia is more of a forest hiding place, because Netflix has also lost 600,000 subscribers in the United States and Canada. Only the Asia area is growing, with a gain of 1 million subscribers. Following these disappointing results, Netflix shares fell 24% on the stock market, with markets expecting a total gain of 2.5 million subscribers.

In other words, Netflix can no longer afford to sit on the subscriber and revenue leverage of account sharing. Even more so in such a competitive landscape, with the arrival in 2019 of Disney +, AppleTV +, Paramount +, HBOMax and Peacock in the United States, which are added to Amazon Prime Video and Hulu in the United States, and Canal + Series, OCS. and Jump in France. They are all very serious competitors, with strong ambitions.

Towards a surplus of a few euros for an additional “sub-account”?

How, then, to monetize this group of 100 million households? Netflix does not seem to choose the difficult option, which is to ban the sharing of accounts and force these users to pay for a subscription. An important decision: many of these users are students or modest families, who probably would not have the means or desire to pay a full subscription, even the lowest with 8.99 euros per month.

Therefore, salvation may come from an overload. Since the beginning of March, Netflix has launched tests in South American countries (Chile, Costa Rica and Peru at the moment) to charge your customers for adding additional profiles to your account. But this surplus allows us to transform what until now was just a simple profile into a real sub-account.

The principle: Standard (€ 13.99 per month) and Premium (€ 17.99 per month) subscribers can add up to two “sub-accounts” to their main account. The difference with a simple additional profile? Each sub-account has its own username and password, which means that the owner of the main account does not have access to it. If they choose to pay for their account themselves, or the primary user no longer wants to pay for sub-accounts, secondary users can transfer their list, view history, and personalized recommendations to their new account.

To determine whether an account is shared between multiple households, Netflix uses the IP address and device identifiers. This makes it impossible to share your password with someone outside the home because, thanks to device identifiers and IP address, Netflix will be able to understand that these are actually different users.

The streaming giant plans to generalize this system to its major markets within a year. Now it remains to determine the value of the additional cost: in Chile as in Costa Rica, users pay the equivalent of 2.70 euros per additional sub-account. In Peru, Netflix has set it at 1.90 euros.

Cheaper subscriptions and video games as diversification channels

In the face of a breakdown in sustainable growth – a loss of 2 million subscribers is expected in the second quarter – and fierce competition, Netflix could also end its policy of relentlessly increasing subscription costs, which is not sustainable in time. of growth. and hegemony over competition.

During a conference with analysts, Reed Hastings, co-CEO of Netflix, revealed that platform is considering the idea of ​​offering new, cheaper subscriptions, with advertising, in 2023 or 2024. A real surprise: until now, Netflix had always rejected the idea of ​​integrating advertising into its offer because it was positioned as a break with traditional television, largely funded by advertising revenue.

But Netflix, which offers some of the most expensive subscriptions on the market (8.99 euros for the basic formula, 13.49 euros for the standard formula, 17.99 euros for the premium formula), needs to diversify its sources of revenue. “VSthey consider us quite open to the idea of ​​offering even lower prices with advertising to give the consumer a new choice “said the leader.

This mixed model, half subscription, half advertising, had been adopted until then by market challengers. The latest to arrive in the United States, Peacock (the giant streaming service of NBC Universal), has chosen to try to find a place in the market more quickly, offering an offer of $ 4.99 a month that gives access to all the contents of your platform. , but with ads.

Finally, Netflix has also entered the world of video games, which could increase the time spent on the platform and be a loss leader for hiring a subscription. The platform has been offering a number of games at its service since last November, some of which are inspired by the universe of its great success, the series Strange things. In September, he bought his first video game studio, Night School Studio, a California startup.