100 million houses shared a Netflix password in 2022. The platform shared the data and announced that it would implement measures to avoid it. Although it did not disclose the impact, the Los Angeles Times put an estimate of somewhere between $9.1 billion and $12.5 billion. The news came as part of a series of measures that the service sought to implement as a strategy to continue ensuring its income, but also as a reaction to the first time it stopped growing in the market, even losing subscribers. In countries like Spain, Portugal, Canada and New Zealand, the measure is already underway. In Spain the result was a loss of 1 million users, 15% of its base in the country. Is it the right decision to avoid password sharing?
In 2016 Reed Hastings, CEO of Netflix, had called the practice of password sharing a positive. At that time, the statement was not intended to motivate action, but he understood that, on the one hand, it implied more views of its content and, therefore, more word of mouth in relation to it. It also resulted, in some cases, in new subscribers who preferred to have their own account and not depend on someone else. The setting was, of course, very different. Netflix still had a lot of market to grow and the competition was practically non-existent.
The reaction of the Spanish market puts on the table how positive the measure will be for Netflix. If you have lost a million subscribers in Spain, how many will you lose in the US, Mexico and Canada… in total? The action by Netflix was intended to encourage, by offering new plans, a greater number of subscribers. So far, it has not been like that. Netflix has against a perception that its content in general is not that good (is it really so?), a greater offer and alternatives at a lower price.
Perhaps the question is that Netflix must rethink its business model. Its growth framework has diminished. It has a debt of more than 14 trillion dollars (by the end of 2022). Among others, there are three central elements to the appeal of Netflix: content for the whole family, original content (one of its challenges after many of the studios began to withdraw their titles when creating new platforms) new every week and complete content (seasons of complete series). No other platform offers the number of releases (some are from the catalog and come from other producers) or the consumption dynamics. However, that hasn’t stopped them from retaining their users and growing. Is that differentiator so essential to the success of Netflix?
It is too soon to decide if the measure against the use of shared passwords by Netflix is the appropriate one. It is not early for the platform to adjust its strategy on all fronts, to avoid losing more subscribers and its leadership in the platform service.
