If you use someone else’s password to watch Netflix, go get your credit card. Netflix tried different strategies in Latin America last year, and a crackdown on password sharing (or charging for sharing) will begin in earnest in the first half of this year, according to people familiar with the company’s plans.
Netflix has asked people to pay to add users or houses to their account. It turns out that most people would rather set up their own account than pay to share, and now the company will give them both options.
Netflix will have to implement this plan gradually. You don’t want to alienate customers by forcing them to get a new plan right away. Instead, it will send them increasingly suggestive reminders. If Netflix can convert at least 10% of non-payers, that means 10 million new subscribers.
The password sharing initiative is part of a new era at Netflix, and a new phase in Hollywood’s transition to streaming. Analyst Michael Nathanson has called it the third act of the streaming wars.
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In the first phase, Netflix, Hulu and Amazon offered endless libraries of shows at a deep discount compared to cable TV. In the second phase, traditional media companies spent large sums of money to get clients at below market prices.
But demand for new streaming entertainment has stopped growing in the United States, according to Parrot Analytics, a third-party data firm that measures interest in programs that use inputs such as hacking and social media interactions.
Parrot says this means we have reached a saturation point in the market. That might be overkill, depending on his definition of saturation. All the major streaming services are still adding new customers, and people are spending more time on streaming services than ever before.
But nearly 80% of people in the US already pay for at least one streaming service. The world’s largest streaming services, Netflix and Disney+, have stopped adding customers in the US.
We got the first sign of this slowdown a year ago this week when Netflix warned investors that its growth was moderating. That was the start of a brutal year for the industry, a fog most expect to last for at least another six months.
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Netflix will update on the state of its business on Thursday when it reports results for its fourth quarter of 2022. The company forecasts an addition of regarding 4.5 million customers, its worst fourth quarter since 2014.
This slowdown is a big reason investors now want these services to post a profit. Netflix is happy that investors are shifting their focus from subscriber growth and instead focusing on sales and operating profit. While Netflix is already profitable, most other streaming services will need another couple of years.. Netflix still generates less free cash flow than most of its peers, and it will take several months for its new initiatives ( and paid sharing) to have an impact on its bottom line.
While all streaming services are more cautious regarding spending, they risk losing customers if they really cut big. That’s why everyone is trying to make more money from their existing customers. Netflix and Disney+ introduced , while all the major streaming services except Peacock have raised prices in the last 18 months.
The danger for all of these businesses is that higher prices will lead to more cancellations.. Cancellation (or abandonment) rates are already at an all-time high, according to data from Antenna.
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