Netflix put limits on login sharing. Is it the right decision?

Man watching netflix on ipad

Share This Post

Subscription POV #39

By Christine Retbøll

Netflix is testing initiatives that minimize cheating with login sharing with the purpose to secure profitability. But how will this affect the user experience and is it a trend we will see in other streaming services? Keep reading and you will find the answer.

Netflix is one of the biggest players in movie and TV series streaming. Do I even need to introduce them anymore? The probability that you are a subscriber or have been one, is quite large. Netflix revolutionized the industry and switched consumer behaviour from renting and buying movies on VHS and DVD to streaming them from an application.

However, the industry is feeling a pressure from both the amount of competitors, but also the tendency for customers to share logins with friends and family, which today, is more the rule than the exception. Actually, even as a consultant in Subscrybe I myself am borrowing a login just to watch ‘a show or two’ – actually, 100 million households share logins with others. But now, Netflix is aiming to restrict users who aren’t paying for their service.

No more freeloaders

On Netflix, you can have up to five profiles, with an endless number of devices. Now, Netflix wants to secure that devices can only be used profiles from the same household.

What does this mean for users?

In practice, Netflix will uphold the change by letting users register a primary household that can be used as much as you like. If a profile is suddenly streaming from another IP address for more than 14 days, Netflix will place an additional cost for the paying subscriber. Netflix is currently testing this change in South America with a number of different fees.

Totally fair or a poor customer experience?

The question then becomes, what does this mean for user experience? An important factor is whether it creates increased churn or more faithful and paying subscribers. In the first quarter of 2022, Netflix lost a staggering 200.000 subscribers and I can’t help but think that the user who isn’t paying could be tempted to jump to a competitor for a while or completely dump Netflix.

It is Netflix’ hope that the product is so valuable that the user cannot live without the content and, therefore, register as paying customers or become part of the extra fee.

Netflix is already an exciting player in the subscription movement, because their product has created a community effect much like the one we see at Spotify. These are services where a cancellation quickly affects others than the original subscriber. In a way, Netflix is limiting this community feeling by charging an extra fee for users who feel ‘part of the community’. I will even argue that the social community that rises from login sharing helps to minimize the risk of churn. On the other hand, users who need the content will most likely be willing to pay for it, after a little initial frustration – I know I will!

Another important factor that we in the subscription industry need to bear in mind is convenience. Because this change means that subscribers have only 14 days a year, where they can stream Netflix on the go and on vacation. Does this degrade the product or has Netflix become such a strong part of the user’s everyday life that the behaviour will adapt to the change? My assessment is that it will affect the user experience, when possibilities and flexibility is substantially decreased.

What does this mean for you as a subscription enthusiast?

Can Netflix change the streaming service industry once again, if they place extra costs on what is currently viewed as cheating? Quite possibly!

Since the industry is already under pressure because of the current economy, streaming services like Netflix have experienced increased churn. Therefore, I think that this new approach from Netflix is especially relevant now, in order to deal with freeloaders and, instead, secure revenue through existing users.

What happens with the streaming industry, if Netflix succeed with retaining subscribers whilst simultaneously generating better profitability? Netflix has done it before and has been a big inspiration for the industry and their competitors, so I definitely thank that we have a Netflix Effect 2.0 in the making. You’re welcome to bring out the popcorn.