Netflix's Password-Sharing Crackdown Is Already a Mess
Reports out of one of the first test markets, Peru, reveal that Netflix is still struggling to define a basic premise of its strategy -- just what is a 'household'?
Before committing to a global crackdown on password sharers at the end of 2022, Netflix in March announced a new test program of its go-to-market strategy in three of its less-profitable Latin American markets, Peru, Costa Rica and Chile.
According to a rather solid report by non-profit news org Rest of World, that test isn't going well.
Rest of World interviewed 12 Netflix customers in Peru, and also talked to concerned local consumer protection agencies. The site reported ample confusion among local customers, many subjected to different rules amid the testing, and a seeming overall lack of understanding by all concerned as to what constitutes a "household."
In Peru, customers sharing accounts with individuals who don't live in the same house or apartment were told they could add two outside-the-domicile users for 8 soles a month (around $2). That's an attractive option to each user relative to having to open a new Netflix account, which runs 24.90 soles a month (around $6.80) for a basic plan.
Some users canceled their service outright. Others ignored the warnings and kept right on sharing. Still others talked to local Netflix customer service reps, unable to agree with them on the definition of “household.” For example, the concept of a son not living in your home — and no longer considered part of the household — didn't resonate with some.
Netflix customer service agents in many cases simply tell confounded customers that they can receive a special voucher code as a workaround.
Netflix also conceded that the test was progressive and that different customers in the region were subjected to different terms and pricing.
This caught the attention of consumer watchdog groups in the test regions, who met with Netflix in April, expressing concern that customers were being treated differently.
Certainly, at a time when Netflix's stock price is depressed, customer growth is in recession, and revenue expansion is declining, the development of the company's global password-sharing policy is under scrutiny and on a timeline.
Netflix said that at least 30 million of its customers share passwords, meaning around 15 million customers worldwide (the “shareees,” as we might call them) don‘t pay for the service.
By some estimates, Netflix could add $1.6 billion in revenue annually to its bottom line if it gets its password-sharing problem in control … without alienating a huge portion of its customer base.
Latin America is Netflix’s lowest-revenue global region, with Brazil and Mexico representing its biggest contributors.
Peru, Costa Rica and Chile represent lower impact stakes should tests run awry and trigger subscriber defections. But any lost souls — or soles, as the case may be — are attracting scrutiny for Netflix right now, from investors and competitors alike.
“A lot of other services are going to wait for Netflix to bloody their nose before they do something similar,” said Parks Associates analyst Paul Erickson to Rest of World. ■
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Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!
By David Bloom