End to password sharing: Boon or Bane for Netflix?

-By Shouvik Budhiraja

‘Sharing is caring’ is something we all have been taught in our childhood, but as we all know, too much of anything is never good. The OTT giant Netflix is a prime example of the same. The latest estimates suggest that about one in three Netflix users are sharing access to their services.

Since the advent of Netflix, people all around the world have grown closer to each other, not because they know each other, but because of the wonderful concept of ‘password sharing.’ Sam from Germany was somehow connected to Raj from India through Netflix. This connection was due to the chain of password sharing created as people shared passwords with their friends and family, who subsequently shared it with their friends and families, and so on. Although this sounded good in theory, people all around the world were saving money and enjoying top-notch entertainment which meant a huge bummer for Netflix and this was something that they could no longer stand.

In 2017, Netflix was open to password sharing and even used this as a marketing technique, as its main goal was to increase its subscriber share, being far ahead of the competition. However, when in 2019 Covid struck, bad luck struck Netflix as well. People stuck at home relied upon OTTs as their only friends, which resulted in other platforms such as Amazon Prime and Disney Plus Hotstar gaining traction. The competition for Netflix suddenly increased, and it lost millions of its customers during this window.  

When Netflix lost a great deal of its subscribers, allowing password sharing and bearing the loss of revenue caused by it was no longer an option for the streaming giant. It was estimated that Netflix lost $791 million in the year 2022 due to password sharing. Even for a behemoth like Netflix, this is a huge sum.

In April 2023, the day everybody in the world was dreading, finally arrived. Enough was enough for Netflix, and it announced the end of password sharing. This angered people all around the globe as this was unexpected. Password sharing for them was as ordinary as taking a bath, and they enjoyed the facility of one person paying and the rest reaping the benefits. Enraged subscribers threatened to leave the platform, hoping that Netflix on seeing this would take back this policy, but Netflix had other plans. The streaming giant was ready to face the risk of losing a significant proportion of its subscribers just to put an end to huge losses of revenue due to password sharing, and that is what it did. 

This new phase started with Netflix sending emails to customers who were sharing their passwords outside of their households, notifying them that password sharing was no longer an option, and additional charges would be required to share passwords outside of their households. This policy functioned on the proposition that people from the same household would use the same internet connection. People using the Netflix account from a different household will be logged out or will be shown the option to add their account to the subscription for an additional fee, ending password sharing forever and gaining additional revenue from it. However, this policy also had its loopholes wherein people could go to the house from where they were sharing the Netflix account and log in on the desired device using the household’s Wi-Fi. Despite the flaws, this policy has proved to be a major success for Netflix. 

Initially, people doubted this policy and claimed that this would result in heavy losses for Netflix as nobody would pay for their Netflix subscription when they were enjoying it at ease earlier, and people would simply switch to other streaming platforms. But defying all odds, Netflix proved the world wrong. It showed the world that the content it has is something that speaks for itself. Netflix this year enjoyed the biggest increase in its subscribers since the pandemic, which is a remarkable feat. It added nearly 5.9 million subscribers in the period of April – June. This number was way more than what various analysts had predicted. This was a direct result of its policy to end password sharing.

In conclusion, Netflix’s bold move to end password sharing marked a turning point in the streaming industry. While met with initial resistance, the streaming giant demonstrated the resilience of its content and the value it brings to subscribers. The substantial increase in its subscribers during the April – June period this year stands as a testament to the success of their strategy. As other platforms, such as Disney Plus Hotstar, take inspiration from Netflix’s triumph, the landscape of password sharing in the streaming world is evolving. It remains to be seen how these changes will shape the future of online entertainment, but one thing is clear – Netflix’s decision has left a significant mark on the industry, setting a precedent for others to follow.