Netflix crackdown on password sharing pays off

Netflix announced its quarterly earnings Wednesday with the news that with its crackdown on password sharing, the company added nearly 6 million paid subscribers last quarter.

That’s almost three times what Wall Street expected. It’s a win for Netflix, even if not for viewers. Is it likely to spread to other streamers?

Netflix hasn’t cracked down on everyone who’s password sharing yet. But if you haven’t been caught, the company’s coming for you. Sharing is tracked through IP addresses, device IDs and usernames, said streaming analyst Dan Rayburn.

“Because if you have four, five, six different profiles, chances are you’re probably sharing that account with multiple people,” Rayburn said.

He said Netflix has been smart by starting slow so it doesn’t alienate its users. And it’s also given consumers more pricing options. 

“I think the arrival of an ad-supported, less-expensive tier around the same time of this idea, that made it a lot more palatable,” said Tim Hanlon, CEO of The Vertere Group.

Netflix with ads is $6.99 a month. A standard subscription is $15.49. 

The password sharing crackdown was bound to happen, Hanlon said. Until recently, streaming platforms prioritized subscription numbers over profits.

“I think, frankly, this is a hangover of unmitigated pursuit of growth,” he said.

And since Netflix’s experiment has been successful, other platforms are likely to adopt it. As investors become pickier, media companies are pivoting to a new view, said Eric Sorensen at Parks Associates.

“Password sharing is actually a form of pirated content,” Sorensen said.

Is sharing accounts is illegal? Sorensen said that falls into a gray area. But if anyone asks, I plead the Fifth.