Netflix’s Crackdown On Password Sharing

Much has been said about Netflix’s password-sharing crackdown, and yet, analysts are torn on its success. While some reporting indicates that subscribers recover afterwards, there’s a new article every day explaining how different parts of the world are leaving the world’s first streaming service behind.

The Streaming Industry

It was over a decade ago that Netflix transitioned to a streaming service, disrupting the entertainment industry in a big way. Even today, we can see aftershocks, such as writers’ strike in Hollywood, where streaming service residuals and AI are their main raison d’être. However, streaming has given unrivaled convenience for consumers and allowed the creation of projects that wouldn’t have received cable or movie funding.

The industry is much larger than Netflix now, as many competitors and other streaming entertainment companies are becoming increasingly popular. In the same decade that Netflix found its feet, the iGaming industry also found massive success by digitalizing casino games. That included interactive media, leveraging streaming technology to show what live game shows offer for new customers outside of video-on-demand. By giving sign-up offers, sites incentivize viewers to interact with their entertainment in a way that wasn’t possible before. This interactivity is why live streaming has become a very popular form of entertainment online.

This rise of streamed content proved fertile ground for Netflix, which doesn’t offer live content, but video-on-demand streaming at convenience using the same base technology. It combined the best of both worlds, especially once they started making their own originals that benefited from new and creative shows without the limits of cable TV. They started as a disruptor to traditional television, now they’re at the head of their own industry. If Netflix declines, if that’s even happening, it wouldn’t be the end of streaming. Even with the strike, Hollywood is jostling for their dues because they know streaming is here to stay.

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The Password-Sharing Crackdown Impact

As a business that got by with boastful subscribership growth, Netflix started to face resistance when Disney, Amazon, Hulu, and every other competitor jumped into the scene. Subscriber growth slowed and so they reoriented towards profitability per subscriber instead. That’s why free trials were axed and now, password-sharing has been limited, so that more subscribers provide revenue.

It didn’t help that the crackdown was rumored for a long time, then announced, but still took nearly a year to roll out. Thankfully, Netflix knew how to navigate the situation by offering a lower-price plan which also includes ads, expanding another revenue source for the company.

The immediate impact has been drastic – one million subscribers lost in Spain. That was in Q1 of 2023. Then the crackdown hit Australia in Q2, costing them 200,000 subscribers. Through both, Netflix’s message was clear – stay the course, as the password crackdown strategy was always about long-term gain.

Netflix’s Q2 Subscriber Growth

Turns out, the suits at Netflix didn’t have to wait very long. While drop-offs have been reported, Netflix’s Q2 subscriber growth tells a different story. There were early signs that the crackdown was working. Antenna data analysis reported that sign-ups still outpaced cancellations as early as May.

Then the Q2 reports dropped, showing that 5.89 million subscribers had joined the service, making a total of 238.39 million. That’s an increase in new subscribers when compared with the previous quarter, where they gained less than 2 million. Across 2022, they had been bleeding subscribers consistently.

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Netflix’s crackdown is working, by the numbers. However, not all subscriber growth will be due to paid sharing – there are a lot of markets that are only recently coming online across the world and when they do, Netflix is there waiting for them. Meanwhile, we don’t know how many of those who dropped the service have come back, since they have a lot of other options for video-on-demand streaming nowadays.

In the coming months, there may be more reports that subscribers in certain countries are dropping Netflix. While true and newsworthy, this doesn’t mean that the company is suffering, the numbers show that the crackdown is working for the company.

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