Netflix, who are facing intense competition from the likes of Disney+ and new players such as HBO Max and soon to be launched Paramount Plus have seen their brand come under attack as the streaming service tries to add more accounts by stopping people from account sharing.
Families who were initially sold a subscription on the basis of being able to share with a ‘Family” member are now being told that sharing access with another family member is out with analysts tipping increased churn with Netflix customers now having the option of new services instead of Netflix.
Users are already getting pop up messages questioning their subscription.
GammaWire, claims some users have already encountered an inquiry when they log on asking for verification that they are the owner of the Netflix account. A warning message reads: “If you don’t live with the owner of this account, you need your own account to keep watching.”
A spokesperson for Netflix confirmed the test claiming it is “designed to help ensure that people using Netflix accounts are authorized to do so.”
It is also designed to ensure revenue is not lost as the streaming space has grown increasingly competitive. According to an analysis by research firm Parks Associates, password piracy and sharing cost streaming providers $9.1 billion in 2019 alone. The firm estimates that figure will rise to $12.5 billion by 2024.
The Company claims that the exercise is “designed to help ensure that people using Netflix accounts are authorized to do so.”
Analysts are now questioning how many will become paying users. While several analysts are confident that most won’t want to give up access to shows like “Bridgerton” or “The Queen’s Gambit,” the question brings uncertainty at a time when rival services are adding millions of subscribers.
Netflix has underperformed as investors consider its post-pandemic prospects.
The stock is up about 3% over the past six months, compared with a 13% rally in the Nasdaq 100 Index.
For Benchmark Co.’s Matthew Harrigan told Bloomberg the underperformance will probably continue “as global consumers are disgorged from their couches” amid the Covid-19 vaccine rollout. The password crackdown could dampen Netflix’s pricing power, he noted.
Churn is seen the top risk for Netflix in 2021 as new entrants enter the Australian market.
Forecasts vary on what percentage of subscribers share their accounts with people outside their households. Bloomberg Intelligence said between 20% and 30% of Netflix’s 74 million domestic users potentially shared that information, while market-research firm Magid estimated that a third of subscribers did, citing a survey it conducted last year.
