Nearly every one of Netflix's new competitors offers a cheaper tier with advertising. And as they rolled out, they introduced features that have now become the norm customers expect, including an option to pay less if you watch ads. Nearly all of Hollywood's major media companies have launched their own streaming services to take on Netflix, including Apple TV Plus, Disney Plus, HBO Max, Peacock and Paramount Plus. Building itself into a giant by going against the grain of the TV industry, Netflix spent years dismissing the notion of advertising on its service.įast forward to today: Netflix is the one behind the times. Back when traditional, commercial-packed TV was the main way people watched, Netflix pitched itself as the alternative that wouldn't interrupt the flow of your programming with advertising, nor would it make you wait week to week to watch your next episode. The world's biggest subscription video service, Netflix grew into a behemoth partly thanks to its strategy of making shows and movies available in ad-free binges. Thursday marked the launch of Netflix's cheaper, ad-supported tier in the US and eight other countries, after it rolled out in Canada and Mexico on Tuesday. That may explain why the company doesn’t want to fixate on those price hikes too much.The era of Netflix with advertising is here. The hard truth for Netflix is that it can’t keep raising prices without exacerbating those other issues. People have a limited amount of money they’re willing to spend on streaming services, and each time the cost of Netflix increases, competing services and password sharing start to look like more compelling alternatives. In the end, this all comes back to price hikes. If you’re sharing a password with a friend or family member, I wouldn’t lose much sleep over it right now. Just as garden-variety price hikes might cause customers to flee, draconian account control measures could turn off paying subscribers as well. I suspect this is why Netflix is not moving all too swiftly on the password-sharing front despite its well-publicized experiments, with no plans to expand its crackdown in the United States for another year. A subscriber that shares their password with far-flung family members might be less likely to cancel even in the face of repeated price hikes. Password sharing could also a valuable weapon against churn, as Netflix customers are among the least likely to abandon their subscriptions on a seasonal basis. Some account sharers may not consider a subscription to be worth paying for at any price, and mechanisms to prevent it could also create new inconveniences for paying customers. It’s simply paying more attention now because subscriber growth has slowed, and those 100 million sharers seem like a juicy target for fresh revenue.īut this crackdown will have its challenges as well. The company says that the percentage of people sharing their accounts has not meaningfully changed over the years. Note that Netlfix is not dealing with a sudden spike in password sharing. It briefly tested a system last year that asked users to prove they’re not sharing passwords, and last month, it launched a test in Chile, Costa Rica, and Peru that lets password sharers pay for up to two extra accounts, each with their own profiles. In recent months, Netflix has started formulating a response. In its letter to shareholders, the company estimates that more than 100 million households worldwide are accessing someone else’s account, 30 million of which are in the United States and Canada. The newly competitive landscape also helps explain why Netflix is now looking to password sharers for a bailout.
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