Netflix password crackdown makes school college students nervous

The Netflix login page displayed on a laptop screen and the Netflix logo displayed on a phone screen can be seen in this illustrative photo taken on January 2, 2023 in Krakow, Poland.

Jakub Porzycki | Nurphoto | Getty Images

As Netflix The introduction of password-sharing policies in the United States is fast approaching, and college students using accounts linked to family or friends are preparing for changes in their streaming habits.

The company has said it expects new password policies in the coming months, although it didn’t give details on what they would look like. Netflix in February outlined password-sharing protocols for users in Canada, New Zealand, Portugal and Spain, asking users to set a “primary location” for their Netflix accounts — and charging additional monthly fees for “off-household sub-accounts.” add to .”

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While Netflix hasn’t said whether the US plan will ultimately resemble those earlier changes, some worry that a crackdown on password sharing will shake up streaming for college students who’ve just moved from home and students with lesser could weigh on income and their families.

Sam Figiel, a sophomore at Mercer University in Georgia, said many of his peers’ courses require access to Netflix. Figiel, who uses his mother’s account, said almost everyone he knows at school watches Netflix, although he and some friends may walk away from the platform if password sharing ends.

“Without Netflix, I would have to find a way to compensate for the classes, but the only other way I could compensate would be to go to another streaming platform,” Figiel said. “My parents are paying for three kids in college. They each have their own expenses. They pay all of our car payments, all of our phone bills, so they don’t really have a lot of extra money to spend.”

Netflix has long touted how it puts subscribers first. However, the incremental changes to password sharing have created uncertainty among college students who may not have or want to spend disposable income on their own subscriptions.

Netflix spokeswoman Kumiko Hidaka referred CNBC to previous announcements by the company for information on its previous moves, but declined to comment further. Chengyi Long, the company’s director of product innovation, said in February that more than 100 million households are sharing accounts, accounting for about 43% of the company’s 231 million paid global memberships as of this month.

It may not be that expensive, but at the end of the day it saves you money.

Vrisha Sookraj

University of Maryland Junior

According to a 2022 Parks Associates survey, 40% of US households share or use common passwords, up from 27% in 2019. People in the 18-34 age group make up 30% of all Netflix users are more likely to share passwords than older viewers. Netflix reported 74.3 million paid streaming subscribers in the US and Canada in the fourth quarter.

Vrisha Sookraj, a junior at the University of Maryland who watches Netflix from her parents’ account, said it’s the streaming platform for almost everyone she knows. But she’s worried the future policy could scare off some younger consumers.

Sookraj suggested a student plan similar to the cheaper subscription plans offered by SpotifyHulu and Amazon Prime could allow for more flexibility while accommodating different income levels. She is still undecided whether she would pay the monthly fee herself.

“Maybe it’s not that expensive, but at the end of the day you save money,” Sookraj said.

Netflix executives have acknowledged that while the change should benefit the company’s financial results, it may not be as popular with users. Co-CEO Ted Sarandos said at a conference in December that the paid-sharing model “feels a lot like a price hike,” adding that it will be “really revenue-boosting” and “market-expanding.”

But he added, “Make no mistake, I don’t think consumers will love it at first sight.”

Previous crackdown on password sharing

Netflix said last month that users in Canada, New Zealand, Portugal and Spain can create up to two “sub-accounts” for users who don’t live at the main location for a monthly fee per additional user: CA$7.99 in Canada, CA$7.99 NZ$ in New Zealand. 3.99 euros in Portugal and 5.99 euros in Spain.

The company didn’t share what a US pricing model would look like — if it follows suit.

In the countries listed above, users can also ask non-household members to set up their own individual accounts by transferring their profiles to a new account that will retain personalized recommendations and the original account’s viewing history.

The guidelines came after a testing phase in Chile, Peru and Costa Rica that began in May.

The company has worked to support “customer choice and, frankly, a long history of customer centricity,” Netflix executive Greg Peters, who became co-CEO in January, said during a conference call last October.

An image from the Netflix series Stranger Things.

Source: Netflix

Still, he said, the company must balance those goals with a need to “get paid.”

For Netflix, the calculus pits subscriber growth against monthly fees — and not for the first time. In November, Netflix introduced a new tier called “Basic With Ads” that costs $6.99 per month — an offer to attract more viewers at a lower price.

Some Wall Street analysts believe there could be a hiccup immediately following a US password crackdown, leading to higher churn in the second quarter, followed by possible revenue growth.

Wells Fargo analysts believe that password sharing could be a bigger revenue catalyst in the short term than adopting the ad-supported tier.

In a January note, Macquarie analyst Tim Nollen speculated that if enough free users were pushed off the platform and then reinstated as paying subscribers or added as sub-accounts, average revenue per user could increase. He told CNBC this week that he expects many users who are dropping the service to come back fairly quickly given the size of Netflix’s content base, although he anticipates an initial churn in the next quarter.

“There are many, many, many US users who aren’t paying for it, and so I think they’re very sensitive to the backlash they’re going to get if they roll this out,” Nollen said. “It’s going to be some time before they really know what they’re doing and can start making real money from it.”

If Netflix charges additional fees for sub-accounts in the US, those additional costs may prove challenging for Thuan Tran, a Duke University senior from Vietnam who shares his own account with his sister and partner. While acknowledging that many Duke students have the financial means to bear additional expenses, he said significant changes to the subscription structure would make him think twice.

“If your whole trick is that you can share an account with people you love in different places… and then undo that now and then charge people more if they want more profiles or more screens, then go for it kind of goes against a lot of the things that made your site appealing to a lot of viewers,” Tran said.

stay or go

While the cost of a borrower’s subscription could increase, some students feel Netflix is ​​too important to ditch.

Elizabeth Danaher, a sophomore at the University of Missouri-Columbia studying communications and film, said Netflix has made it possible for her to watch movies with her family in Illinois while she’s at school, particularly her father, who published A League of Their Own. and “Home Alone 2”. She said it would “definitely hurt” if the cost structure prohibited her from accessing Netflix — which she believes is an important “source of information” — though she said she and many of her colleagues are likely shelling out a few bucks a month would.

“I think at the end of the day Netflix is ​​probably a necessity for me,” Danaher said.

Around 66% of homes nationwide have Netflix, according to a study by the Leichtman Research Group to be released. According to an online survey of 3,500 US adults, about 14% of all households that have Netflix rent it from someone else and don’t pay.

Netflix shares have been hit by subscription price cuts

“Sharing has helped them grow the company, but now it’s limiting their potential subscriber growth,” President and Chief Analyst Bruce Leichtman said, adding that Netflix lost nearly a million subscribers in the U.S. and Canada over the past year.

Leichtman estimates that sub-accounts could cost an additional $3 each, and says about half of dividers and borrowers say they would pay a fee at that rate, according to survey data. About 10% in both categories said they would pay the additional fee but would also try to downgrade their account.

Of those survey participants who share their credentials, about a quarter say they would stop Netflix after a policy change that would cost them additional monthly fees per sub-account, compared with a third of borrowers. Though Leichtman said it’s unlikely that will happen to this extent, given people’s willingness to pay a few extra dollars a month under the new guidelines.

Aravind Kalathil, a senior at the University of Missouri-Columbia, said he uses a stranger’s Netflix account logged into his apartment’s smart TV. Kalathil and his roommates don’t know who owns the account or who pays for it, and are prepared to have their access locked without warning should password restrictions go into effect.

“In the end it probably won’t have the greatest effect for us because our families all have Netflix accounts and we’ll make sure it works, but it just adds extra hassle and annoyance to something that’s going to end up with the crowd.” expendable from streaming services out there,” Kalathil said.

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