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Netflix tests its staying power with global password crackdown

Netflix is ​​at a juncture where the company will soon find out whether or not its brand still has staying power and the potential to dominate today’s streaming market, given the abundance of choice available to consumers. On Tuesday, Netflix announced its plans to roll out its password-sharing restrictions to global audiences, including the US, after years of encouraging the practice as a means of introducing its service to a wider range of consumers. . These days, though, Netflix sees moochers as lost profits, with an estimated 100 million households globally sharing their user accounts, 30 million of which are in the US and Canada.

In part, the consumer backlash against the crackdown has to do with a complete change in Netflix’s position on password sharing. There was a time the company believed that people who benefited from shared passwords would eventually convert to become Netflix members — but that didn’t always turn out to be true.

In 2016, Netflix’s then-CEO Reed Hastings told reporters that the company liked when people were sharing Netflix with family and friends, calling it a “positive thing”.

“We love people sharing Netflix whether it’s two people on a couch or 10 people on a couch,” he said. Hastings compared subscribing to Netflix as just another coming-of-age milestone for young adults, “as kids move through their lives, they like to be in control of their lives, and As they have income, we look at them separately. Subscribe. It hasn’t really been a problem.

Netflix next year Tweeted“Love is sharing a password,” — people dug up a recent post to complain about the new password-sharing rules.

Due to increased competition in the streaming market, Netflix’s approach to password sharing has changed in part. Where Netflix was once the leading service for cord-cutters, today consumers have a variety of services to choose from, including those with sizable IP catalogs, such as Disney+; those offering live TV access, such as Hulu; and those with must-watch shows like HBO Max, which has recently been rebranded as Max. The latter has benefited from pop culture sensations like “Game of Thrones,” first, and now, “Succession,” to keep its viewers hooked.

In addition, there are other major services available to streaming audiences, such as NBCU’s Peacock (now bundled with Comcast’s new Now TV) or Paramount+ (soon to be merged with Showtime). And for those with a price sensitivity, there are free streamers like Zumo, The Roku Channel, Amazon Freeway, Pluto, and more.

More critically, there is a generation of youngsters who no longer spend as much time watching TV as their parents, instead preferring to scroll through other entertainment apps like YouTube and TikTok. Globally, a study of app use by children and teens found that children and teens ages 4 to 18 were watching an average of 67 minutes of YouTube per day, compared to just 48 minutes of Netflix. The report found that TikTok had gained most of its time, with an average of 107 minutes per day.

When the free content created by a world of largely unpaid content creators is more compelling than the scripted, well-crafted shows and movies that take millions to produce, Netflix is ​​probably the only one in trouble here. Streamer is not. No wonder it’s grasping for any lost dollars.

Despite these competitive concerns, Netflix has managed to keep its finger on the pulse over the years, with recent hits like “Squid Game,” “Wednesday,” “Stranger Things,” “Bridgerton,” “The Crown,” “Emily in Paris,” and more. have achieved success. and “love is blind,” all of which have become cultural touchstones. However, amid a dwindling number of subscribers, the company admitted last year that it needed to make more series and movies that consumers would enjoy and more hit the bar

Another risk for Netflix is ​​that the composition of its catalog has changed. One of the things that made Netflix indispensable in the past was the vastness of its content offerings, which included back catalog fare and popular movies. It has suffered in recent years as rights owners have withdrawn some of their best shows and movies to enhance their services. In addition to losing major IP like Disney’s Marvel shows, which Netflix canceled as part of its deal with Disney, it also lost older, under-the-radar content that people actually used to Netflix. – Like for comfortable TV and background viewing.

As it turns out, many Netflix users were regularly streaming classic shows like “The Office” or “Friends” in their downtime.

“The Office,” for example, was the most-watched show on Netflix but has been pulled by NBCU in 2021. “Friends” exits Warner Bros. in 2020. in 2021, but outside a modest debut in the top 10 at launch, it quickly dropped out of the list and has yet to return.

The timing of the action is also a risky bet for Netflix, as economic uncertainty and post-Covid readjustment have pushed food, gas and rent prices higher, causing consumers to watch their wallets more closely — and unnecessarily Dumping subscriptions. As The Wall Street Journal reported in April. The report cited Antenna data saying that cancellations of premium streaming services in the US, including Netflix and Hulu, were set to increase by 49% in 2022 compared to the previous year.

Netflix has assured investors that the cancellation resulting from its password crackdown will be a temporary setback. But it hasn’t yet tested that theory in the U.S.

During its first-quarter earnings call, Netflix co-CEO Greg Peters said that the results of the Rift in the first test markets look a lot like how customers reacted to the price hike. It found some moochers would sign up for their own accounts or people would pay for additional members – like parents, perhaps, supporting their adult children living outside the home.

To what extent this strategy will be successful in the US and other markets remains to be seen. Netflix missed Wall Street’s estimate for subscriber additions in Q1, with net additions of just 1.75 million (a 5% increase year-over-year), compared to analysts’ forecasts of 3 million.

As Netflix begins its password-sharing crackdown in the US and other markets, many consumers are concerned about the details of the implementation. How would it punish people who travel for a living, for example? Or those who often take vacations and other trips away from home? What about people who have a second home, such as a beach house, that they visit regularly? Why can’t kids in college count as just a screen, not a mochaar?

Netflix has provided limited information about how it is responding to these carve-outs, noting only that people traveling have no problem accessing its service while traveling with a device from their home. Will be At other times, it may prompt users to verify that they are traveling – a system that was criticized by consumers as an unnecessary imposition – especially for a paid service where regional games Things like – which have to be linked to geolocation – are not being offered.

While Netflix has no reason to make it harder for users to stream its service, the fear of those challenges is on consumers’ minds — and now, perhaps their wallets, too.

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