New Netflix account sharing rules could hurt company, analysis shows

Netflix is obviously hoping its crackdown on account and password sharing will help the company boost the number of individual subscriptions and thus make more money. However, new data points to potential areas of concern.

The new limits on account sharing are already active in several Latin American countries, and they are expected to reach other parts of the world starting in March.

As Cybernews already reported, Netflix’s plan is quite smart – in order to limit users’ ability to evade the new order, subscribers will be required to watch something once a month from home Wi-Fi to log a consistent home address.

Social media has already exploded with anger and numerous threats to quit the streaming service altogether rather than pay a small fee to add a new user or choose a cheaper tier with annoying ads.

Digital i, a global streaming video on demand (SVOD) insight specialist, also calculates that the impact of the incoming changes might be large and painful – whatever Netflix uses as a primary metric for success.

Across major European territories, there are approximately 19 million shared Netflix accounts. Their users collectively consume around twice as much content on the platform than those accounts that do not share access, Digital i said in an email to Cybernews.

"The plans mean a significant shift in the experience for users and the ease in which accounts can be shared across households,” Matt Ross, Digital i Product Director, said.

“Whilst Netflix will hope that this drives more subscription numbers, they will also need to consider the potential negative impact this may have on the user experience and user engagement on the platform as a whole."

Ross also explained that this heavy usage of shared Netflix accounts provides value for the consumer and subsequently reduces the risk of subscription churn – Netflix is trying to limit the wave of subscribers who will decide to cancel their memberships.

“Managing churn from those users whose service has become restricted will be an important factor for Netflix as they look to capitalize on these changes in terms of net subscription growth,” Ross said.

Another piece of data clearly shows that account sharers help pieces of content attain higher reach. This is not surprising as more people using the account means a higher chance of these users watching the chosen content.

“Therefore, with the move to cut down account sharing, titles will take a hit in their reach figures. For example, 74% of account sharers viewed The Adam Project, while among non-account sharers only 47% watched the show,” Digital i said.

Netflix lost subscribers for two quarters in a row last year – this was a first. It has bounced back later, but the push to monetize more subscribers might prove to be costly in terms of this metric.

This is probably why Netflix told Wall Street last year that it was focusing on revenue rather than the number of subscriptions. The streaming giant is still profitable and made $4.4 billion in 2022.

Then again, it’s not like there is no other choice for irritated consumers. Other streamers are certainly watching how the infamous crackdown on password sharing will play out.

If Netflix starts seeing subscriber losses, rival platforms with more solid financial backers will undoubtedly strike with all kinds of special offers to woo the defectors. They may even voice their approval of password sharing in order to attract more so-called freeloaders migrating from Netflix.