Netflix’s new anti-password sharing policy is a desperate financial move
With business down, the streaming service is obviously trying to recoup losses through an annoying measure
Capitalist logic says that innovation is supposed to be a firm’s reaction to competition. When the chips are down, businesses have to find out how to stand out amongst the crowd and get the consumers to flock over them instead of the competition. When you are the biggest, or perhaps only, actor on stage, the shock of a newcomer is supposed to invoke a revival by shattering the complacency mindset.
That is the boilerplate theory. In practice, the pursuit of a bigger bank account will make companies prioritize profitability and obligations to shareholders before pleasing customers most of the time.
Netflix is looking to do just that by introducing an $8 fee for password sharing users paired with a new payment plan. The new basic plan is $5.99 per month, with ads, and exclusive to one personal profile and device. The $9.99 plan is the same but with no ads. The $16.99 “standard plan” means that “a user can watch on two devices at the same time, but they must be in the same physical location.”
Activating a device at a separate location, like a friend or relative’s home, will result in an additional monthly charge of $7.99 for an overall fee of $24.98 before tax. There is also the “premium plan,” which will cost $36.97 a month if you activate the maximum two off-site devices which are $7.99 each.
Now remember, Canadian Netflix was $7.99 per month when it first launched with no restrictions on how many devices you could activate. Times have certainly changed.
Unsurprisingly, many subscribers are not exactly thrilled by the prospect of having to effectively pay an additional subscription fee on top of their existing ones so that family members living away from home can watch movies and TV programs. What’s even more unsurprising is the idea that quite a few might choose to switch to alternative means of media viewing.
Why is Netflix going in on such an alienating practice? Last year Netflix subscription rates plummeted by almost one million, with the premier of Stranger Things Season 4 staunching that outward flow from getting any worse. As previously suggested, the rise of competing streaming services definitely did not help matters. Resting at the top of the mountain for so long made Netflix ill prepared for the arrival of competition.
There are several other factors at play here, from the geopolitics of Russia invading Ukraine, a slew of mediocre original content, and a January 2022 price hike driving away North American subscribers, it seems that Netflix is not reacting well to its market shares shrinking.
Thus, it falls onto the users’ laps to recoup those losses. With business down and competition up, Netflix does not want to get displaced in a marketplace it, arguably, codified into public consciousness and popularity. So, subscribers get the vice-grip squeeze.
What will the people do in light of the fee hike? With more alternatives than before, start anticipating people will jump ship to a different service. Or, perhaps, they may opt to fly the digital black flag and refuse to swear any allegiances any longer. This is by no means an endorsement, but simply a decision that some people have made.
Nevertheless, Netflix’s decision is more than likely to cost them users. In their backlash against market changes, they may have overshot it and people will be responding to this with expressions of discontent.