The Netflix Nickel-And-Diming Is Probably Only Just Getting Started
from the meet-the-new-boss dept
As we recently noted, Netflix is preparing for a big crackdown on users who share account passwords with folks outside of their home. When Netflix was a pesky upstart it declared password sharing a good thing and a form of free advertising. Now that it’s facing Wall Street pressure to keep quarterly earnings up in the face of more competition, the push is on to start nickel-and-diming the userbase.
Under the new program, users who share passwords with folks outside of their home (something they’ll apparently track by IP or MAC address), will be required to pay even more money ($3 per user). And, it’s worth repeating, Netflix already limits concurrent streams per existing account. This new price hike (to be clear that’s what it is) comes on the heels of a significant price hike last year.
Much like piracy statistic debates, there’s no guarantee that annoying account holders will drive password sharers to get new plans. And a new survey suggests that as many as 13 percent of Netflix users could actually quit the service over the price hike. Even if only half of those users actually follow through, that could mean a revenue hit of as much as $900 million:
Still, if it were, say, 6.5% leaving the service, that would still represent around 5 million customers, and that’s “$900 million in [annual] lost revenue,” [Aluma’s Michael] Greeson noted.
On the flip side, the firm estimates that as many as 12% of the users would be willing to pay the higher fee per household. Parents, for example, might be willing to pay the additional $3 per user fee for their daughter instead of forcing her to subscriber to a whole new $15 a month plan. Even then, the firm estimates the money made here might not counter the money lost.
Here’s the thing, though. This is just the start. Netflix is being forced into turf protection due to increased competition. Streaming growth is also going to be constrained because the broadband market (directly tied to new streaming accounts) is saturated. So if it’s going to satiate the insatiable hunger of Wall Street for improved quarterly returns, it will need to find new and creative ways to grow revenues.
As the Tudum fracas illustrates, that’s not going great. Some growth could come in the form of new ventures like its game streaming service (in which Netflix will be a late-arriving underdog), but most of it will come in the form of the exact kind of nickel-and-diming that the traditional cable industry has tinkered with for years. That, in turn, risks driving even more subscribers to scrappy upstarts (like Netflix used to be) which don’t engage in that kind of behavior.
That market wants what it wants, and what it mostly wants is growth at any cost.