If there’s one thing people love about the internet, it’s getting something for free. Free News. Free music. Free porn. Free status updates. Free photos. And yes, free movies.
Netflix’s original sin — allowing unrestricted account sharing — has put the company in the position it is in today, with more than 100 million “households” sharing accounts. (For context, the company said it had 230.75 million paid memberships by the end of 2022.) The status quo “undermines our long-term ability to invest and improve Netflix and build our business,” Netflix wrote in its Quarterly letter to shareholders.
The idea of sharing accounts in and of itself isn’t necessarily a bad thing. It makes sense in a lot of ways, and the tacit approval has helped make Netflix the global leader in video-on-demand streaming that it is today. There are many borderline cases that make sense – and “families” and “households” have many definitions, after all. It could be a child with separated parents. Or a kid just going to college. Or an adult living part-time in one place and part-time in another.
But 100 million households not paying for Netflix is, they say, real money that Netflix can no longer and shouldn’t ignore. And so Netflix began “carefully exploring different options for people who want to share their account to pay a little more.” It started the plan In eight Latin American countries in mid-2022, before falling to just three after just three months – Chile, Peru and Costa Rica.
Netflix’s decision to allow password sharing at all was a costly mistake.
Message transmission was always difficult. But Netflix compounded the first problem — taking away something that used to be free — with poor communication. It warned the rest of the world that by the end of March 2023 it would “begin rolling out more widespread paid sharing.” But it was not said how. In the face of internet outrage, that discrepancy left a vacuum to be filled by blogs looking to capitalize on the confusion when Netflix inadvertently showed the rest of the world help pages for the paid account sharing programs in Chile, Peru, and Costa Rica .
Netflix needs to figure out exactly how it will target the 100+ million “households” that use the service but don’t pay for it. Will it be the same as Chile, Peru and Costa Rica, with things more or less tied to your home network? Or something else? Are devices really blocked outside of your home network? Or will you be able to Check if these devices really part of your “household”, which essentially boils down to two-factor authentication?
And Netflix should recognize that every scheme won’t be fair to everyone. It simply cannot anticipate every possible variable.
But Netflix also needs to be prepared for the setback. This is quite a large band-aid, peeling off painfully slowly for a remarkably large number of “households”. We continue to use this word in quotation marks because we don’t yet know Netflix’s definition.
But this much we do know: Netflix is coming for at least some of the money it’s had on the table for years. This is going to be a hard pill for a lot of people. The question is how badly people will choke. Netflix must expect more people to sign up for a full account or pay more for an additional household than cancel the service outright.
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