The free viewing party on Netflix has ended.
The streaming company plans to crack down on password sharing next year, including rolling out “sub-accounts” that allow members to grant access to services to people outside their family.
Netflix announced Tuesday that it added 2.4 million subscribers in the third quarter. This was a major uptick for a company that saw its once dominant foothold collapse early in the year. Business, since withdrew from Russia.
But the company’s results pleased Wall Street and sent the stock soaring in after-hours trading.
Netflix chief financial officer Spencer Neumann said in a conference call with investors on Tuesday, “We’re not growing as fast as we’d like yet.” We are pleased with the progress we have made, but we know there is much more to be done.”
Now, the company is poised to change its strategy, considering low-cost plans with ads, sharing login credentials to use Netflix, and helping 100 million households who aren’t paying for the service. trying to steal money. Here’s how this works for consumers.
– Why was Netflix a turbulent year?
The streaming service, like dozens of other companies, lost 700,000 subscribers when it pulled out of Russia after the invasion of Ukraine. But that decline coincided with a broader decline in viewership as pandemic-era restrictions receded and consumers increasingly sought other entertainment options.
When the pandemic started, Netflix had 16 million subscribers in the quarter ending March 2020, and 10 million in the April-June period. However, growth slowed as coronavirus restrictions were lifted across the country and people sought entertainment outside their homes.
Netflix had a strong recovery in the third quarter, adding twice as many subscribers as expected and exceeding revenue expectations.
– What does this mean for consumers?
Netflix plans to crack down on password sharing, including making people pay more to use the same account across different households.
Starting in early 2023, the streamer said this week that many people who share accounts will be able to transfer their profiles (including shows and recommendations they’ve watched) to new users. Also, account holders who share passwords with people outside their family create “sub-accounts” to make payments.
In March, Netflix launched trials in Chile, Peru and Costa Rica. Members can add subaccounts for users who do not live together for about $3. Users in these countries were also able to allow their profile and browsing history to be transferred to other users with whom they shared their account.
It said this week that it would roll out these features “more broadly” early next year.
“Given that we have rolled out feature testing in three countries, we want to see how these features work first, so we can see how we can continue to monetize account sharing elsewhere. Netflix told The Washington Post in an email earlier this year.
Restricting users’ ability to share passwords might force some to pay for their accounts, while others simply give up Netflix and choose one of the myriad streaming options. There is also the possibility of turning your attention to something else.
Netflix chief operating officer Greg Peters said the company’s job is to “better translate” free consumer value into revenue while respecting households’ desire for flexibility. Told.
“If you have a sister who lives in another city, you’ll want to share Netflix with her, and that’s great,” Peters said at a press conference earlier this year. It’s not like we’re there, but we’re asking you to pay a little more to be able to share it with her so she gets the benefit and value of the service, and the revenue associated with that viewing.”
Moody’s senior vice president Neil Begley says Netflix could make up to $1.8 billion if it can make money from about half of the 100 million households who aren’t paying to use its service. He didn’t think the policy change would hurt Netflix’s business, just help with cash flow.
“It’s hard to say they were mad about the company’s actions even if they were quite willing to borrow someone else’s password. This was never a free service,” Begley told The Post. rice field. “Especially if you look at the statistics, I don’t think anyone would hate a company that is doing this right now.”
– What kind of competition does Netflix face?
Gone are the days when Netflix was everything and online streaming was everything. The company faces stiff competition from the likes of Hulu, Disney Plus, HBO Max, Amazon Prime Video, Paramount Plus and Peacock. (Amazon founder Jeff Bezos owns the Washington Post.)
The market has been so crowded that some early streaming services, even the well-funded ones, have shut down before they can actually launch.
CNN’s digital news streaming service, CNN Plus, shut down after just a month of launch after failing to attract enough subscribers. Also, his much-hyped mobile streaming service, Quibi, famously shut down within months of its launch, despite an investment of around $1.5 billion.
A jam-packed playing field means the rest of the streaming services will have to work to attract viewers with a constant list of original shows, beloved movies, and interactive content.
– Are prices going up again?
Given that the company raised prices in January, Hidaka told The Post in April that it wasn’t in the near future.
Instead, Netflix is trying to widen the price gap by offering lower-cost plans with some ads.
The company plans to launch an ad-supported plan called Basic next month in 12 countries, including the US and UK. The company says he will be priced at $6.99 in the US, and viewers will see him 4-5 minutes of ads per hour.
Many of the same Netflix shows will be available, though the company says some will be left out due to “licensing restrictions.”
“People who follow Netflix know that I am against the complexity of advertising and a big fan of the simplicity of subscriptions. “And we want consumers who want lower prices and are more tolerant of advertising,” Chief Executive Reid Hastings said in a call with reporters earlier this year. It makes a lot of sense to be able to have things.”
The move will help Netflix expand into markets where customers may have limited budgets, Begley told The Post. It also reflects the need for Netflix to be flexible as it seeks ways to make money from its content without the option of rivals such as Disney and Paramount, who can monetize their products through theme park and merchandise revenue. I’m here.
“To grow from here, they’re going to have to be more imaginative,” Begley told the Post, adding that Netflix is already claimed by nearly 300 of the nearly 800 million pay-TV households worldwide. I mentioned that there is
– How does Netflix define a “household”?
According to Hidaka, people who live together are considered households, even if it means a two-generation family of parents and children, roommates, and couples.
“Flexibility is key, and we want to make it easy for members to use Netflix while traveling or living in two homes,” Hidaka told The Post in an email. increase.
The standard $15.49 monthly plan (increased from $13.99 in January) has five user profiles and two simultaneous streams. The basic $9.99 package allows one active stream per account, while the premium $19.99 plan allows up to four.