This time, it is promised, Netflix should regulate subscription sharing much more strictly during the year 2023. The video streaming giant’s co-CEO, Reed Hastings, recently indicated to senior executives the pandemic had “masked the scale of the problem”. And that now is the time to fix it, reveals the wall street journal. Concretely, Netflix wants to charge for the possibility of sharing its account “outside the home”. That is to say, to all people who benefit from access outside the subscriber’s place of residence, divided into two categories. Those who enjoy it for free. But also those who duly discharge their part, from a distance. Why ?
- Because Netflix estimates that 100 million people use its services thanks to a shared password under the coat. The California listed company cannot include these “hidden” underwriters on its balance sheets. It currently has, officially, 223 million subscribers.
- Because this practice simply makes him lose money, at least theoretically. Take the example of four regular Netflix viewers grouped together under a premium account billed at $19.99 across the Atlantic. Per person, the formula costs about 5 dollars per month. That’s $2 less than Netflix’s very first $6.99 subscription with advertising. According to analysts from Cowen Inc, quoted by the American daily, Netflix could thanks to this new policy generate an additional turnover of 721 million dollars next year, in North America alone. An important argument after a difficult year, which saw the company suffer losses and record a slight decline in its number of subscribers (since caught up).
- Finally, because out-of-home account sharing has in fact been banned for a long time in its general conditions of use. As, moreover, with many other video on demand (SVOD) services. But, in practice, it has always been tolerated, even encouraged.
Two unknowns
The other question is: how will the platform do it? This is where the first troubles start. “What about a person who consumes a lot of Netflix outside his home, on vacation, while traveling, or in a second home?” asks consultant specialist in video streaming Pascal Lechevallier. The company should sort out its customers based on IP addresses, device IDs and account activity (the 20th viewing of a series on the same account could quickly become suspect). But she did not elaborate further on how her system works. “A child at university who is still part of our household would not have the right to use the platform on his campus? It’s lunar. We underestimate all the problematic situations posed by this tracking of users . As well as its cost”, points out Gilles Pezet, media analyst at NPA Conseil. So far, the company has operated a handful of tests in Latin America. It also rolled out, this time on a global scale, a new “profile transfer” feature to entice those enjoying a shared subscription to switch to theirs. A kind of accountability before the hour.
Because the heart of the system will be the new “tax” administered to those who wish to share their access to Netflix. This should not be too large so as not to scare off historical subscribers. Since the arrival of Netflix in 2014 in France, its subscription has experienced an average increase of 41%, or 3.8 euros compared to 2022, indicates a recent study carried out by hellosafe. The premium (four simultaneous accesses authorized, the most suitable for sharing) is the one that records the greatest increase, going from 11.99 euros to 17.99 (+ 50%, 6 euros). “The United States and the United Kingdom have also experienced significant price increases and they have had an impact on unsubscriptions”, warns Pascal Lechevallier. In the midst of global inflation, sensitivity to tariffs is at its maximum.
However, Netflix must also anticipate these losses and be careful not to set a tax that is too low. It’s all about balance. In Latin America, an amount of 3 dollars had been added to standard and premium access in the event of “out of home” sharing. A moderate price which nevertheless caused an outcry in Argentina. At Netflix, internally, there are more general fears of a “comcastification” of the service (a discreet tackle to the American cable giant Comcast), a gas plant that is not very accommodating for subscribers, very far from the simplicity that made the success of the platform originally, again reports the wall street journal. An impression already reinforced by the appearance this year of the first subscriptions containing advertising, at 5.99 euros. Like in good old TV. A thousand leagues from the modern and “pop” image shaped by society.
“Its competitors will also have to tackle this problem”
The imminence of this new policy is not surprising, however. “For ten years, Netflix was very lax about this because it suited its business. The markets gave their first remarks in 2019. As Reed Hastings says, the breakthrough made during the Covid-19 pandemic then a little more delayed the deadline”, underlines Gilles Pezet. This change in philosophy, if successful, could spread to other streamers. “The shared accounts affair concerns the whole sector and what Netflix prepares on this subject is watched with great interest. Its competitors will also have to tackle this problem. Netflix is the guinea pig as it has often been for by its leading position”, continues the analyst. This summer, L’Express also revealed how the Alliance for creativity and entertainment, the new arm of video-on-demand services around the world – of which Netflix, Amazon Prime, Disney and Canal + in France are members – had taken legal action against Spliiit, a French platform which mediates between subscription owners and strangers. The association also explained to us recently that sharing passwords is akin to theft, which is therefore illegal. At the end of December, the Office of the intellectual property of the United Kingdom has a time considered the practice as such, before retracting.
However, Netflix has some good reasons to embark on this sharing project. “A metric now matters more to analysts beyond the number of subscribers: the average revenue per subscriber (ARPU)”, points out Pascal Lechevallier. On this, the giant is well ahead of its competitors. Media expert Alain Le Diberder sums it up on its website : “A Disney subscriber earns three times less than a Netflix subscriber.” The company thus prefers, even if it means losing subscribers, to make the faithful pay more. Admittedly, the conquest of new viewers is not over. “In France, we are still far from having filled up: only a little more than 1 in 2 French people have a subscription to an SVOD service”, observes Pascal Lechevallier. Hence the recent arrival of yet another player in the battle, Paramount +. But the situation is more complicated in the United States, where 85% of Americans have at least one SVOD subscription. Here, the war becomes more difficult. “Someone who does not have Netflix in the most mature markets is that he does not want to use it. Point bar”, slice Gilles Pezet. So does Netflix really need to put significant effort into this battle? “The last customers to subscribe are generally less profitable than the first. We reach a layer of customers who are probably less well-off, more price-sensitive, less motivated, therefore requiring greater marketing expenditure, and probably more unfaithful, also notes Alain Le Diberder in his analysis.Depending on the country, depending on the degree of competition, bringing in a new subscriber can cost between 40 and 150 euros.For this expense to be profitable, the customer must then stay long enough for the margin made per subscriber compensates for this initial expense.” The ideal new subscriber that Netflix dreams of would thus be one of its hidden customers. A thought that reassures, in this time of crisis.