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.
Filed Under: broadband, competition, fees, nickel and diming, streaming, video, wall street
Companies: netflix
Comments on “The Netflix Nickel-And-Diming Is Probably Only Just Getting Started”
I was going to come here to post this as a reminder for people who would make the same comment they always make, but I wasn’t fast enough, so you’ll do.
The short response: I was under the impression the monthly charge I pay for Netflix was paying Netflix for its services. What am I paying for?
The long response: I have a 4 screen netflix subscription. I could play netflix 24/7 in my home on 4 simultaneous streams and it would incur no extra cost on my part. But if I go on a business trip and both I and the other members of my household want to watch a few hours of netflix, my membership costs 3 extra dollars a month.
This fee is not about Netflix “…[getting] paid for its services…”. The fee is completely disconnected from the financial burden it supposedly generates. If it is profitable to run 4 US streams simultaneously 24/7 to the same household, its profitable to run 4 US streams simultaneously 24/7 regardless of geographic location within the US.
Moreover, as you look at pricing options you see netflix forces me to pay for 4 simultaneous streams even if I only need 3. Forcing me to pay for more streams and denying me the ability to capitalize on what I paid for (4 simultaneous streams) is not about getting paid, its about intentionally forcing me to pay more for less.
I had no issue with Netflix cracking down on simultaneous streams back in 2012. That was a sensible decision, and pricing which allows me to pay for only 1 stream and pay more for 2 or 4 simultaneous streams is great consumer choice option. An additional $3 for Netflix to be available on my lunch break isn’t.
And given that households are increasingly not single families but shared spaces of adults as living costs increase but wages do not, The likely hood that a household could end up, temporarily, with significant geographic separation due to not taking joint vacations beyond the traditional issues of work travel that would leave the rest of a single family household at home, means this policy would regularly require non-password-sharing households to nevertheless pay the $3 password sharing fee. Because this isn’t about password-sharing households breaking the rules.
And that leads me to the point that Techdirt has been highlighting the shift in Netflix messaging not simply because it is anti-consumer, but because it is a real time case study of a company responding to fiscal issues in a way that in the past has lead to a death spiral and how that is being caused by the market and capitalist demands.
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I don’t think Netflix asking to get paid for its services is anything to get het up about.
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I was going to come here to post this as a reminder for people who would make the same comment they always make, but I wasn’t fast enough, so you’ll do.
The short response: I was under the impression the monthly charge I pay for Netflix was paying Netflix for its services. What am I paying for?
The long response: I have a 4 screen netflix subscription. I could play netflix 24/7 in my home on 4 simultaneous streams and it would incur no extra cost on my part. But if I go on a business trip and both I and the other members of my household want to watch a few hours of netflix, my membership costs 3 extra dollars a month.
This fee is not about Netflix “…[getting] paid for its services…”. The fee is completely disconnected from the financial burden it supposedly generates. If it is profitable to run 4 US streams simultaneously 24/7 to the same household, its profitable to run 4 US streams simultaneously 24/7 regardless of geographic location within the US.
Moreover, as you look at pricing options you see netflix forces me to pay for 4 simultaneous streams even if I only need 3. Forcing me to pay for more streams and denying me the ability to capitalize on what I paid for (4 simultaneous streams) is not about getting paid, its about intentionally forcing me to pay more for less.
I had no issue with Netflix cracking down on simultaneous streams back in 2012. That was a sensible decision, and pricing which allows me to pay for only 1 stream and pay more for 2 or 4 simultaneous streams is great consumer choice option. An additional $3 for Netflix to be available on my lunch break isn’t.
And given that households are increasingly not single families but shared spaces of adults as living costs increase but wages do not, The likely hood that a household could end up, temporarily, with significant geographic separation due to not taking joint vacations beyond the traditional issues of work travel that would leave the rest of a single family household at home, means this policy would regularly require non-password-sharing households to nevertheless pay the $3 password sharing fee. Because this isn’t about password-sharing households breaking the rules.
And that leads me to the point that Techdirt has been highlighting the shift in Netflix messaging not simply because it is anti-consumer, but because it is a real time case study of a company responding to fiscal issues in a way that in the past has lead to a death spiral and how that is being caused by the market and capitalist demands.
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I would make this the First Word if I could. Bra-fucking-vo, James. 👏
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Going on a business trip will not incur a $3 fee. You are paying for the service and still using it yourself. Letting other people mooch off your service, and signing in on their own devices would incur a $3 fee.
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Getting hit with a $3/month fee increase that you have to contact support about (if you notice it) if you use a new device is bad enough. How responsive is Netflix customer service to issues like this?
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You assume that they don’t just all contribute to paying for the subscription or that the “moochers” aren’t their spouse and children.
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Wait, the $21.61 a month I already pay Netflix isn’t for its services? Fuck, you mean I could have just been using Netflix without paying for it this whole time?
Netflix started out so well in original content: quality over quantity and a commitment to finish the story. Over the years, they’ve gone ever further in the wrong direction. Now, I won’t even start a new Netflix series unless it’s a self-contained limited series or it already has a large viewer base. They’ve moved entirely to a “quantity is everything” approach, and their quality and follow-through has fallen off a cliff. They still have some great series (Haunting at…, Midnight Mass, Witcher, etc), but they are buried in piles of garbage content and the constant threat of mid-story cancellation.
What used to be the best value in TV is now the worst value in streaming. My Netflix plan ends in a couple weeks. I’ve been a continuous subscriber since they launched as a DVD-by-mail company and the envelopes were still yellow. Over 20 years, and they’re losing me now over poor content quality, inflated prices, and the fact that they will no longer let me share with my fixed-income mother-in-law.
Interestingly, Apple TV+ has kind of become the new-old Netflix. Original content with a focus on quality over quantity and a low subscription cost. Let’s hope they can resist the temptation of content bloat.
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Before they lost the Starz deal, their quantity and quality were both high.
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The Starz deal was the worst. Their content was the worst quality. Netflix quality was much better once the Starz crap left the service.
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By “the Starz crap” are you referring to the catalog of almost every movie released by the US studios? Because that’s what I was talking about. When that deal expired, that’s when it suddenly became a lot harder to find a particular movie on Netflix, because they lost access to most of them.
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Because it use to be free.
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I also paid per rental in yellow envelope days. I finally cancelled my DVD service in 2020. If the discs came at all they were scratched, damaged, or broken.
Thanks for not caring USPS!
Netflix had something up till the late 2010s with it’s deep library. As other speciality rental companies died Netflix kept buying the leftovers. When eHit when under Netflix suddenly added a massive Asian library. When GoreFlix died Netflix added hundreds of independent horror titles.
Etc etc etc. something that still happens to this day for their DVD service.
As streaming tool off they did a good job adding materials for our less common tastes.eventually hooking me in. A one-time never streamer.
And then it stopped. I went from nightly viewing to a few days. To weekly.
In my take they became to mainstream for their own good. Take away in house (which isn’t much) and every new MS film is also available somewhere else.
They’re going to continue to loose customers if they don’t start adding more independent fair. And that doesn’t mean blockbusters from other countries. That means independent.
Today they have little to offer. Arrow, Criterion, Hammer, Celestial, Eros, Northland, Midnight and AfterDark.
The independents have new welcoming homes.
And here’s the big kicker to them. Amazon is adding these independent services as channels to PrimeVideo!
Netflix was long known for its deep library. With both options.but it’s no longer adding to it in any real way.
They’re making major mistakes now! You can’t turn your back on the loyal base that made you—and penny by penny the mainstream at the same time.
We’re willing to put up with fee crap for our fix. If you offer us something. The mainstream is not. And they are trying hard to kill both markets now!
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The New York Times paywall has been wildly successful. There’s nothing wrong with Netflix trying different models to make more money. No one is entitled to set their own price for a service they buy, no matter how whiny they get when those prices change. And there isn’t anything that anyone does for which you can’t find an analyst saying that it might fall. (The model analyst report says “Tomorrow is likely to be the same as today, but there’s a good chance it could be different.”)
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“There’s nothing wrong with Netflix trying different models to make more money”
Well, the problem is that in reaction to their first notable drop in subscribers in their history (mainly in the US, and worldwide they’d still have increased subscribers if they hadn’t blocked Russia), they’re threatening to destroy some of the reasons that people went there in the first place.
“No one is entitled to set their own price for a service they buy”
No, but everyone is entitled to state what they think is wrong and take their money elsewhere if they feel they’re no longer getting value for money. I can’t set what they should charge, but I sure as hell can set what I’m willing to pay.
I personally think that ads+an incorrectly applied system to detect password sharing (something that until recently they encouraged) will cause them way more problems than people are giving credit for, although it’s clear that the newly competitive market is giving them a challenge that must be addressed. I just hope that the rush to sustain an unsustainable infinite growth cycle doesn’t destroy the value of the entire service.
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Given how Netflix has been cancelling popular/well-reviewed shows after a couple of seasons, and given the company’s recent move to all but axe the animation department—which killed a bunch of in-the-works animation projects, including an animated adaptation of the graphic novel Bone—Netflix seems poised to prove an old adage true:
You either die a hero, or you live long enough to see yourself become the villain.
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Poised? They joined the MPAA in January 2019. The only real question is how to interpret “you” and “yourself”: “you” might be seeing your successor make your former company into a villain.
The “death spiral” mentioned by James sounds bad, but it’s not usually the people in charge who lose. Eddie Lampert drove Sears into bankruptcy and stuck taxpayers with the pension bills, but personally remained a billionaire. Or look at “cord-cutting”: despite constant subscriber losses, are any high-ranking people in cable companies fearing job losses or salary cuts?
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Well, the problem with Netflix is also it’s biggest asset – they have been taking a lot of chances on stuff that’s not restricted by the traditional ad-supported business models. They likely still pale in comparison to the likes of Fox, who routinely not only axed shows before they could find an audience, but did things like play episodes of shows with overarching subplots out of order so there wasn’t a hope of attracting a real audience.
The main thing here is – Netflix’s model is a black box. We are getting some more information on things like rating than we used to, but they will have totally different criteria on what’s viable than other “networks”, and their business model is ultimately on what gets people to continue subscribing, not what’s popular in a particular moment. It’s disappointing that they’ve axed some shows before their time, but it’s also true that they produced a lot of things that no other outlet was willing to produce in the first place.
Then, when it comes to cutting budgets, etc., animation is one of the things usually on the chopping block because of the time and expense involved.
Time will tell if these are the right moves (I’m old enough to remember predictions of doom and how evil they were for deciding to concentrate on original content instead of playing the games of paying endlessly increasing licensing fees to 3rd party studios), but let’s not pretend that cutting departments and axing shows that people love in their 1st/2nd seasons is somehow unique to them.
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I…I didn’t. Like, at all. 👀
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Anecdotally, the NYT paywall has been wildly successful at the “wall” but not the “pay” in my house.
And yet there are charities (the Humble Bundle comes to mind) that do approximately that.
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Is there a point to any of this besides “don’t criticize corporations”?
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The New York Times paywall has been wildly successful.
If you mean wildly successful at losing money by driving away readers, then you’re right. If a newspaper wants to display adverts, I can live with that. If they want to restrict access, then I’m fine doing without knowing their viewpoint on a particular issue. If they have a positive spin, tough. They shouldn’t have locked me out with a paywall.
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https://www.axios.com/2022/02/02/new-york-times-10-million-subscriptions
“For the full year in 2021, the Times brought in more than $2 billion in revenue, the first time it had surpassed $2 billion in a decade.”
I guess woke ideologues think they can make up facts in every aspect of reality.
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So, taking a decade to claw revenue doesn’t count in your world. If you want to ignore that the pay-wall did drive away readers and revenue, go ahead, but it only makes you look stupid.
I guess people like you ignore history because it’s inconvenient…
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Before the paywall went up, the New York Times regularly took in more than $2 billion (inflation adjusted) per annum from print and web combined. Your point?
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The free trial was over. Try paying your bill.
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Noooooooo!
There’s reason they’re facing a lawsuits now. You can’t get out of it once your in. Print, digital, OR online.
I gave up. They keep charging me each month and I no longer care.
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And there’s nothing wrong with criticizing them for making anti-consumer decisions because they’re being beaten up by Wall St. Read James’ First Word up top and explain why any Netflix user should be happy about paying more for nothing.
Literally nobody is arguing that so why waste your time typing it?
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Charging money for a service, changing pricing models, and raising prices is not “anti-consumer”, especially for a luxury service. People whining about such changes are totally exhibiting their sense of entitlement, not to mention people whining about their TV shows being canceled. People thinking they have better insight into how a company should run its business than the people actually running the company are a lot like sports fans yelling at team management for the decisions they make. Here’s an idea – if you’re so much smarter, start your own media company and rake in the big bucks.
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… that most folks are eating dinner right now, so I had to suffer seeing your blather, instead of already being flagged and hidden by the time I got here.
Even so, I’ve bookmarked your post, and the next time you spout off about Big Social Media “cancelling” someone, you can be sure that I’ll be quoting this particular little epistle right back at you. Your own words – own ’em, or GTFO!
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That has merit.
I would argue that there’s some difference between content generated by a company itself as opposed to content created by users that the company is hosting, with respect to complaints about banning. I would also argue that viewpoint-based censorship misleads users of a platform as to the true balance of opinion in the polity, and that’s a more serious reason for complaint than a price increase or a show cancellation.
But if you want to argue that I’m being hypocritical, it’s not an unjustified point of view.
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Deciding to move onto a cheaper alternative, or choosing to go without, is also not “anti-business” or “anti-progress”.
What do you want them to do, celebrate? People who are “entitled” can be annoying, fair, but being an overly agreeable pushover is hardly a reasonable solution. If something I enjoyed comes to an end, a negative reaction is understandable, not because I have weak moral fiber.
If I go to a restaurant and get served a bowl of soup with the chef’s freshly crapped turd in it, I don’t need to have a degree in business management, culinary arts or how the excretion system works to tell that it needs to be sent back to the kitchen.
And how’s that working out for Truth Social so far?
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Charging extra for exactly the same service is not exactly pro-consumer. Whether my family watches the simultaneous streams I already pay for under one roof or in seperate locations makes zero difference to Netflix. Charging extra for that is just a “fuck you” to customers. You only get to do that so many times before people decide to give their money to someone else.
Are you trying to have us believe that in your entire life you’ve never once complained about a business making changes that personally affected you? Do you really think anyone is going to believe that?
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Charging money for a vehicle, reducing the mileage, and raising prices is not “anti-consumer”, especially for a luxury car.
Hear how ridiculous your argument sounds yet, Hymen Rosan? Here’s an idea: if you’re so much smarter, why not follow your own advice?
Pushed me off the fence
We had been considering dropping Netflix since the last price hike, and this helped make up our minds. We already pay extra to increase the stream limit; we will not pay more on top of that because some of the streams may be at a different address.
Even before this we were considering dropping since we were paying more and more for less. Many of the things we watched became exclusives on other services, and I can’t remember the last time a movie I searched for was actually available on Netflix. We end up using alternative means to watch anyway.
Traveling?
Will I run afoul of the multi-hoisehold policy if I use my login in a hotel?
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From what I have seen, they haven’t directly answer that question but I would assume that you would.
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Well, that’s the real question. There’s ways in which sharing can be detected with relative reliability (for example, if people hundreds of miles apart are regularly using the account at the same time for the same locations). But, it will be a disaster if they start incorrectly accusing people who don’t occupy the same physical spot 24/7 every time they want to use their legally paid for service go somewhere new.
The devil’s in the details, I have have real concerns that they will lose a lot through false accusations if they’re not careful.
Not the best strategy, Netflix.
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).
So basically, a user can’t view at home and on their mobile device without getting dinged. And if they watch solely on their mobile device, they can’t use more than one WiFi hotspot without getting dinged. With such a user unfriendly policy, Netflix won’t have any customers after a while, and if they’re anything like the MPA et al., they won’t learn anything from it and just keep doubling down until they no longer exist. Netflix used to be the alternative to ‘traditional media’, and now it’s just like them.
So where’s my lower priced single concurrent stream plan? And refund for having oversubscribed for years?
Or something else they could try is pushing back against Wall Street & pointing out that while they are enjoying the profits from cable & telcos screwing customers with shitty spotty or non-existent coverage, if they actually pushed for growth, Netflix would have access to an even larger pool of customers.
There are people in areas who can’t get enough speed to reliably use Netflix without screaming.
There are people in areas who don’t have a provider available.
Instead of doing the very stupid thing of beating up those willing to pay you to squeeze a few more cents to the bottom line, why not increase the number of potential customers by several million by putting pressure on connecting the entire nation.
But then that makes sense and not more dollars, so they won’t and they will drive customers away & then do more stupid things to increase the bleeding all to make sure the shareholders are happy at the expense of actual revenue from happy customers.
Netflix is OK by me
I think Netflix is reasonably priced.
Compare it with Hulu with Live TV.
Compare it with ComCrap.
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Are you a Netflix employee or stockholder, by any chance?
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That’s a rhetorical question. And if it’s not, the answer is they’re a shill.
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who the hell wants live tv? I do streaming specifically for the lack of the same 6 commercials and the constant interruptions to everything that I’m watching, which made me hate TV for the first 25 years of my life.
I have never had a cable subscription unless the broadband plan i wanted required me to have it. most of the people I know are the same way, and as soon as broadband plans came out that didn’t magically become cheaper if you also did cable, I got rid of it.
currently I’m on a 1 gig symmetrical connection with no cable, using 4 streaming services. Netflix is “free” with my cell phone plan, otherwise, I wouldn’t have it, since they cancel everything I’m interested in and keep adding more softcore porn and idiot contest shows.
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Netflix can’t replicate live TV. Comparing Netflix to hulu with live tv compares an on-demand service with a on-demand+live service. Same with a comcast comparison. Apples and Oranges.
Comparing Netflix to Hulu with no ads is the better comparison, but it doesn’t help you. $12.99 for Hulu with no ads provides 2 simultaneous streams. For Netflix with 2 streams, the cost is $15.99 before the password sharing upcharge. Its more costly with less valuable content.
Try again.
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Are you really sure “syphilis isn’t so bad; compare it with AIDS” is the rhetorical strategy you want to go with?
Netflix is probably at the peak of subscribers,in America if you like marvel TV shows or have kids, you pay for disney, competition in streaming is intense, they could launch Netflix plus, netflix with ads that mainly features older shows.
It’s a late stage of companys , there’s a limited amount of people who can afford to pay for 1 or more streaming services. Netflix maybe made too many low quality TV shows, they are getting good ratings on cheap to make reality TV shows. Now every TV network has launched their own steaming service
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… much the same way that cable services did?
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Netflix will introduce a less-expensive ad-supported plan later this year, as well as additional policies to limit illegitimate password sharing.
Got out while the getting was good...
The day this was announced, I cancelled my Netflix subscription. There was nothing compelling left to watch there and my money was better spent on a Hulu/Disney/HBO Max subscription. On top of that, since I have a ton of Apple-related services, I already have access to unlimited Apple TV anyway (such as that is).