Netflix CEO 'Loves' Netflix Password Sharing
from the customers-not-criminals dept
For a few years now, HBO has turned a blind eye to users that decide to share their passwords for HBO Go (the streaming app for existing cable providers) and HBO Now (the standalone streaming app for cord cutters). Last year HBO CEO Richard Plepler said the company keeps a close eye on the company’s password sharing stats, but said the sharing isn’t a huge phenomenon. Besides, as the CEO argued in an interview a few years back, the act of sharing passwords can be seen as a new form of marketing the brand, and a tool to create a new generation of addicts:
“It?s not that we?re unmindful of it, it just has no impact on the business,? HBO CEO Richard Plepler said. It is, in many ways, a ?terrific marketing vehicle for the next generation of viewers,? he said, noting that it could potentially lead to more subscribers in the future. ?We?re in the business of creating addicts,? he said.
Contrast that to legacy cable operators like Charter Communications, which recently declared that the sharing of login credentials was a diabolical menace. According to Charter (who’ll soon be paying $79 billion to acquire Time Warner Cable and Bright House Networks), password sharing is a scourge, and HBO is a fool for turning a blind eye to such brazen “theft”:
“But to (Charter CEO Tom) Rutledge, companies like HBO show a “complete lack of control and understanding in the space” by letting password sharing continue, and it’s something that must be stopped. “The lack of control over the content by content companies and authentication processes has reduced the demand for video because you don?t have to pay for it,? Mr. Rutledge said on the earnings call. ?That?s going on in the college market.”
Of course automatically seeing everyone as a thief hiding in the shadows is a sort of rite of passage for cable and broadcast executives. And again, contrast Charter’s statement to comments made at CES last week by Netflix CEO Reed Hastings, who proclaimed the company “loved” the idea of password sharing:
“We love people sharing Netflix,” CEO Reed Hastings said Wednesday at the Consumer Electronics Show here in Las Vegas. “That’s a positive thing, not a negative thing.”…A lot of the time, he said, household sharing leads to new customers because kids subscribe on their own as they start to earn income.
Note that like HBO, Netflix’s love of sharing only goes so far; the company’s base $10 version restricts your account to two simultaneous streams, which bumps to four should you pay for the company’s $12 plan. HBO similarly informs its users that it limits the number of concurrent streams per account for “security reasons.” Still, perhaps there’s a lesson buried in here somewhere about not automatically treating potential customers like diabolical criminals?
Filed Under: marketing, password sharing, reed hastings, richard plepler, streaming video
Companies: hbo, netflix
Comments on “Netflix CEO 'Loves' Netflix Password Sharing”
typo
Great writeup!
Here’s a typographical error:
“right of passage” -> “rite of passage”
Cheers,
E
Re: typo
Thanks! fixed.
Re: Re: typo
Bee sure to right it good this time.
“Note that like HBO, Netflix’s love of sharing only goes so far; the company’s base $10 version restricts your account to two simultaneous streams, which bumps to four should you pay for the company’s $12 plan”
They’re a business, I wouldn’t expect them to allow unlimited sharing of an infinitely shareable product. There have to be limits – but, unlike a lot of the legacy players, these limits are placed at sensible points that make sense with the current marketplace. They also don’t have a history of suing those who bypass those limits and demanding that “something be done” – they just deal with the reality in front of them.
It’s like the VPN freakouts. The legacy industry have been panicking, calling paying customers “pirates” because they try to bypass artificial barriers that prevent them from having the same quality product as those in other countries. Netflix have not only never tried blocking VPNs, they’ve made switching between countries easy – sensible for their many customers who actually travel internationally and would like to continue to use the product they pay for. The fact that some people “abuse” this facility is a sign of how backward the regional licencing model is, not of something that needs to be criminalised.
The result? Netflix have a platform where their original content is going to be easily available in almost every country on the planet. Meanwhile, the studios are going to be spending the next year continuing to whine that people in Europe are watching Avengers Age Of Ultron when they only gave permission for that to people in Canada (as a random example).
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It’s actually not infinitely sharable, the number of streams is a proper scarcity from netflix’ point of view, they have to pay for bandwidth per stream on their end.
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I just read other articles where Netflix will now be cracking down on VPN services.
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I think you read it incorrectly. They just said they have no idea how to crack down on VPNs (though everyone knows they do. It’s just a stupid idea to do it, from their perspective at least).
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http://www.androidpolice.com/2016/01/14/netflix-will-block-proxies-that-let-users-access-movies-and-tv-shows-not-available-in-their-home-countries/
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It’s like the VPN freakouts.
Exactly, especially since Netflix does exactly that. So much about cognitive dissonance.
multiple netflix accounts
I actually pay for multiple netflix accounts because they do not try to pull a bunch of “you logins make us think you are a pirate”
But to (Charter CEO Tom) Rutledge, companies like HBO show a “complete lack of control and understanding in the space”
It’s funny. trying to maintain control is the problem that he does not understand.
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This is totally great. Because Rutledge a) doesn’t understand what this is all about (business, of course, making money), and b) an honest confession what HE thinks it’s about: control (control, control, fuck the money, we’re not here to do business, it’s about control).
Seems pretty sensible to me. Instead of yelling and screaming, they just say, “OK, guys. That’s enough, K?”
reduced the demand for video because you don’t have to pay for it
What? Demand increases when you charge money for something?
Re: Response to: Anomynuos Crowad on Jan 14th, 2016 @ 7:11am
Wat.
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Either that or the control. Personally, I HATE watching anything that someone else, preferably a multinational cartel, doesn’t have complete control over. Talk about “not understanding the space.” Le sigh.
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Cable economics is different to normal economics, like the way Hollywood accounting is different to normal accounting.
If I was on the board at Charter and my CEO showed such a lack of understanding of basic supply and demand, I would fire him before the earnings call was over. Yes, sure, people demand less of things they get for free. That’s definitely how it works.
Also, it’s funny how much this sounds like hysterics over P2P a few years ago and how that was destroying the industry because college kids now had free internet.
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“Yes, sure, people demand less of things they get for free.”
Actually, phrased that way it’s true. People demand less OF things if they’re free – that is, they’re willing to put up with lower quality, interruptions, etc. far more than they are with stuff they paid for.
But, phrased the way he put it, it’s nonsense. nobody’s demanding less video streaming if they get it for free.
“Also, it’s funny how much this sounds like hysterics over P2P a few years ago”
The sad thing is how much they’ve been trying to use the same tactics to “fight” without realising how different the target is. They’re still using the “people want free stuff” augment against people who are paying for Netflix accounts and other content FFS..
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The sad thing is how much they’ve been trying to use the same tactics to “fight” without realising how different the target is. They’re still using the “people want free stuff” augment against people who are paying for Netflix accounts and other content FFS..
Not just paying, in the case of people who have to go through VPNs to get a decent Netflix selection, they are willing to pay extra. If they would only realize this, and be willing to accept losing some control, there’s a significant market that’s showing that they are more than willing to pay, and pay well, for content.
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What are you talking about? That Rutledge character just told he gives a rats ass about money, he only cares about control.
We can only hope the market will fix this and throws him out.
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The only problem is that the rest of the board, and likely the larger shareholders, also suffer from the same mind-think.
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Well, what he means is clear enough; “because people can get (the same) video for free, there is less demand in the for-pay video market”. I.e., by “demand”, he is referring only to demand for the legitimate, for-pay offerings – which is an incomplete and shortsighted view of the overall supply-and-demand market, but is not incorrect or invalid as far as it goes.
Idiocy
“But to (Charter CEO Tom) Rutledge, companies like HBO show a “complete lack of control and understanding in the space” by letting password sharing continue, and it’s something that must be stopped.
What a moron. He would actually rather those people who can’t afford a cable subscription or don’t find it worthwhile should get accustomed to living without it. What effect does he think that will have on the market for cable TV in 5 or 10 years? SMH
Re: Idiocy
There’s another thing that struck me: if the service allows for more than one connection then why don’t share one account? Even if it does not allow, what on, what’s the problem of two people using it on different times of the day? Eventually they may want to use it simultaneously and at the very last they will pay 2 extra bucks for more connections…
Re: Re: Idiocy
1 shared account is always better than two potential customers walking away. Not to mention that it is priced that most of the user base can justify the cost rather than share anyway
A world of thieves...
So if that other business isn’t following your business model, then their customers are naturally thieves…
Since when has such a statement ever been anything but irrational and without any kind of sense?
There are no honest people left in the world anymore, because by not using every single service and product in the world they have become a thieves.
Some Netflix users have sub-accounts
My netflix setup is with sub-accounts. Netflix did away with this, which was widely complained about. But after massive revolt, they grandfathered in anyone who was already using sub-accounts.
Sub accounts lets each person have their own viewing history. Their own play list. Their own recommendations.
Why netflix would do away with this baffles me? What would have made more sense would be to have simply changed the pricing structure so that you pay $X for Netflix, and then each sub-account you add costs an additional $Y per month. That way a household with several viewers does pay more, but not many times more for several full blown accounts.
The password sharing seems like a nod nod wink wink to the fact that multiple people within a household want to view Netflix but they can no longer get sub accounts.
Re: Some Netflix users have sub-accounts
It’s simple. Sub-accounts where other people using the main account had their own viewing history, play list, recommendations etc, gives people more or less all the benefits of a full account, for lower cost than a full account. That’s not exactly the most desirable state of affairs. Removing sub-accounts, but allowing multiple people to share a single account does 2 things. 1) It continues to provide the primary feature of sub-accounts – letting families and roommates share a single subscription. 2) Gives anyone that desires the privacy and other benefits of having their own viewing history and such a real incentive to sign up for their own full account.
So it’s a way to softly prod people away from sharing accounts, and towards getting their own as soon as it’s financially viable for them to do so. I’m sure Netflix would prefer that everyone within a household have their own full account, they just recognize that it’s not realistic to try and force people to do so. This is the compromise they came up with between what they want, and what consumers want.
Re: Re: Some Netflix users have sub-accounts
You may be right but it does not invalidate what Danny said. If they want they could charge a small extra to put sub accounts (maybe to a limit) and retain that perk. But why remove them when people were used to them is beyond me. A way to sp´lyt a sub-account into a full one would be a better offering as some people may want to move to their own stuff while retaining their recommendations.
You see, it adds value to the service and that’s the key thing Netflix offers: value, easy access. The content can be found in ‘pirate’ sites.
Re: Re: Re: Some Netflix users have sub-accounts
I would guess they removed it because some of their assumptions from when they developed it proved incorrect. Sub-accounts are a natural feature for them to develop. Parents are going to want to their kids to be able to use their Netflix, and to keep their stuff separate from their kids stuff. However the assumption is that as the kids grow up, either they’ll voluntarily stop using their parent’s account and get their own, or their parents will kick them off the account, forcing them to get their own. The natural result would be an increase in Netflix subscribers with no action required on Netflix’s part.
Things probably weren’t playing out like that in reality. Children who grew up and moved out didn’t have any real incentive to get their own Netflix account unless their parents stopped using Netflix. Netflix could charge or charge more for sub-accounts, but they would be bashed for raising prices, drive away people who “couldn’t afford” the price increase, and generally get a round of bad publicity… and they still wouldn’t have a strong incentive for people to get their own subscriptions instead of continue to use their parents’ subscription. As long as the cost of a sub-account was less than the cost of a main account, the economics would not favor Netflix. It would be easier, and more cost effective for kids or roommates to directly pay their parents or the subscriber for the cost of the sub-account, rather than get their own more expensive main account.
So they removed the sub-account feature. The blow back they got for loss of the feature was likely smaller than it would have been for charging as much for a sub account as for a main account. And they get they get a real incentive for people to gravitate towards getting their own account.
I suppose as you say they could have tried facilitating people upgrading their sub-account to a separate main account. I’m not sure that would have provided the desired results. Netflix wants people using someone else’s account to get their own subscription over time. Sure your suggestion would have removed a barrier to them doing so, but it would not give them the same incentive to do so.
Re: Re: Re:2 Some Netflix users have sub-accounts;WTF
Really? “couldn’t afford” in scare quotes. WTF?
Re: Re: Re:2 Some Netflix users have sub-accounts
Like I said, Netflix could have charged for sub accounts instead of removing that feature.
And, (hey Netflix, pssssssst, are you listening . . .) Netflix could raise their prices! (gasp!)
Yes, they could. Even a 15% increase, and netflix is still a heck of a lot cheaper than cable. And with huge advantages over cable. No ads. No bugs on the screen. No ‘walk on’ characters covering up part of the content.
And if Netflix ever starts having ads, then . . . we’re done. If Netflix needs more revenue, then RAISE YOUR PRICES. Do not go down the advertising road. Or at least offer two options: ads, and a higher priced premium guaranteed ad free experience.
Re: Re: Re:3 Some Netflix users have sub-accounts
Do not go down the advertising road. Or at least offer two options: ads, and a higher priced premium guaranteed ad free experience.
That is a route to disgruntled customers. People don’t like it when a provider puts stuff they don’t like into a service they’re used to and then charges them more to take it out. They could offer a lower priced ad-supported subscription though.
Re: Re: Re:4 Some Netflix users have sub-accounts
It would also be counter-intuitive based on the way the industry is going. Hulu recently offered a way to get rid of (most) ads because so many people were pissed off at seeing them in a service they pay for. For Netflix to suddenly start forcing them on a consumer base who don’t usually see them would be self-destructive at best.
Re: Re: Re:5 Some Netflix users have sub-accounts
Right, Hulu started out with ads from the beginning, so they might be able to get away with charging extra to get rid of them*. Netflix would have a harder time, but I really don’t see them trying that anyway.
* aren’t there still some ads on Hulu Plus, just fewer?
Re: Re: Re:6 Some Netflix users have sub-accounts
Yeah, there’s a list of programs that still have ads, but only about 8-10 I think
Re: Some Netflix users have sub-accounts
I’m lucky to have retained those functionalities for the sub accounts and I find them very, very interesting and useful. I agree with you, instead of removing it they could charge an extra buck or two per extra account. I’d gladly pay since Netflix provides a lot of value to me.
Re: Re: Some Netflix users have sub-accounts
Even if additional sub accounts cost 30% of the cost of a full blown account, it’s still a huge win to the consumer.
In fact, if that were their pricing scheme, I bet a lot of people who share an account today would spring for sub accounts.
I’ve been using my daughter’s account. First thing I did was pay for that upgrade.
She’s sharing it with three friends as well, but only three of us (out of five) use it regularly.
My next door neighbor wants to cut the cord, and one of the first things I’ll be doing is setting her up with a Netflix account. Because they give good value for price.
And yeah, that’s “rite” of passage. Curse those homophones!
Quote: Note that like HBO, Netflix’s love of sharing only goes so far; the company’s base $10 version restricts your account to two simultaneous streams, which bumps to four should you pay for the company’s $12 plan.
anytime a company can get a customer willingly excited and on a regular basis paying an extra 20% in pure profits is a astronomical win.
Who knows it could be that the profit margin on a $10 a month program is only $2 bucks…. and now they have a happy customer talking them up and sharing their joy with others… and they get the profit of two customers… win…win….win
(doing the math I could see that the content companies want the lions share of each subscribers monthly but capped so any extra is bonus but then the remaining gets eaten up by billing advertising etc… thus making the extra $2 bucks pure profit
Talk about misunderstanding
Maybe this shows the direction Charter wants to go. Netflix and HBO are content providers. Charter is a connection provider. The two are not the same, unless Charter is intending to force its users into some kind of Internet based TV/Cable offering of its own, a la Comcast.
yeah, it works
We used a Netflix pword from my cousin about two years ago. 23 months ago, we became Netflix subscribers. And we created two more subscribing families with the same tactic.
Pretty sneaky, Netflix.
Netflix, at least, is trying to pay attention to what the customers want, not what the stockholders want.
Netflix could have my trade (and probably a LOT more trade from people my age) in about the time it takes to sign up if they’d announce the availability of subtitles in streams.
I’ve pretty much quit going to theaters because the subtitling systems in use force your eyes to focus either on the screen or the subtitles but not both at the same time.
Re: Netflix, at least, is trying to pay attention to what the customers want, not what the stockholders want.
I’m not sure what you’re getting at here. Are you saying that you want subtitles “burnt in” to the picture rather than being overlaid? That is, in the manner of a VHS with subtitles permanently on the screen?
If so, that’s unlikely to happen. Not only will it piss off a lot of customers who don’t want subtitles, need them in a different language, etc., but Netflix can only play the videos supplied to them by the studios. They’re unlikely to supply such a thing because they would supply the same file to every country they licence to, with the provide adding the relevant subtitles later.
Re: Netflix, at least, is trying to pay attention to what the customers want, not what the stockholders want.
There’s subtitles on Netflix.
Criminals do tend to identify with other criminals. What is Tom Rutledge but a Criminal stealing and ripping off customers of his company.
It may also be a simple case of their economic model being slightly different from the way most people think.
If I understand correctly, Netflix has a deal where basically they are paying what amounts to a flat or capped out rate for content. So when it comes to adding more users or allowing more viewing, their only real costs are the bandwidth to move the product. So sharing an account has very little bottom line cost for them, compared to the potential value of a future sale as the person gets addicted and wants their own.
Even when the move you from $10 to $12 a month, they extra $2 is almost entirely profit.
it’s not how you would look at things normally, but it appears to work for them.
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“it’s not how you would look at things normally, but it appears to work for them.”
…and?
Does that mean that you agree with the oft-stated premise here that the business models are the problem, not “pirates”? Or, is there something else you’re trying to get at with your rambling opinion based on what you guess they’re doing rather than any actual research?
“Even when the move you from $10 to $12 a month, they extra $2 is almost entirely profit. “
So, their overheads never increase, and that increase in price is not to ensure the ability to licence more content or better service delivery? It’s just pure profit?
Really? I’m sure the citation for that will be forthcoming any moment now…
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don’t be lazy, research it yourself.
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No, that’s not how it works, at least not for the intellectually honest.
For the intellectually honest, if you make the assertion, you provide the evidence. He’s made a claim that I find unlikely, all he has to do is point me to the evidence upon which he’s basing said claim. That’s how an honest discussion works.
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I am honestly shocked that you don’t know how to use Google. You have to be one of the worst trolls ever!
Re: Re: Re:3 Re:
I know perfectly well how to use Google. But, you’re making the claim, not me. It’s therefore your job to provide evidence, not the job of every person reading the article to do your research for you. Especially since, as you’re known to be full of shit, the evidence probably doesn’t say what you claim it does to begin with.
Why do you not at least pretend to be interested in honest debate and provide the evidence for your claims?
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Paul, let’s make this simple:
You can look at deals make by Netflix with, say, Dreamworks. It works out to a flat fee per year or per movie. The number of subscribers / viewers does not seem to be a driver in the price. Rather, Netflix has sort of made a bet based on what feels they can earn against the movies, and Dreamworks has agreed to an amount that pretty much assures them a decent bottom line (pre-accounting) on every movie.
So if Netflix takes your $10 a month account, and you add a second household account to it for an extra couple of bucks, that upsell is against a very small marginal cost of doing business. Thus, most of the income on that $2 goes into their pockets, and not to others.
It’s pretty basic Techdirt stuff.
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So if Netflix takes your $10 a month account, and you add a second household account to it for an extra couple of bucks, that upsell is against a very small marginal cost of doing business. Thus, most of the income on that $2 goes into their pockets, and not to others.
Unless, of course, they decide to do something else with it.
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“You can look at deals make by Netflix with, say, Dreamworks.”
Citation? Do you know for sure there aren’t other clauses? What about deals not done with major studios, how do they differ? What about deals that aren’t exclusive? Your “making it simple” only works if it’s accurate, which you’re yet to convince me of with your “here’s what I assume” statements.
“Thus, most of the income on that $2 goes into their pockets, and not to others.”
…unless there’s other hidden costs, the contracts aren’t as simple as you assume they are, or there are other factors that you haven’t thought of in your gross simplification. I mean, a certain amount of that has to go to increased bandwidth and server load at the very least, especially if the $2 additional user uses as much as the $10 user is. As with most industry sycophants, you seem to assume that the cost of running a service doesn’t have constant overheads to consider outside of licensing fees.
In other words, you pour out your half-assed opinion, based on incomplete or uncited facts and expect everyone else to take it at face value. Figures.
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Really Paul, you can’t type “netflix deal with dreamworks” and start to put it together yourself?
Clearly you are just trolling and being an asshole. Nothing more and nothing less.
” you seem to assume that the cost of running a service doesn’t have constant overheads to consider outside of licensing fees.”
You can go back and look up marginal costs. It’s the very basics of about 80% of the Techdirt view of digital delivery. Once you understand that, we can come back and have a grown up discussion. Until then, I am assuming you are just a troll and I will treat you as such.
Re: Re: Re:3 Re:
“Really Paul, you can’t type “netflix deal with dreamworks” and start to put it together yourself?”
Of course I can, but that’s one deal with one studio. That’s not your claim. Your claim was somewhat wider, and you should already have some information to hand upon which your basing such claims. Unless you’re lying/making crap up, of course.
“Clearly you are just trolling”
Disagreeing with a known liar is not trolling. However, randomly making claims and refusing to provide a single citation do match the description. Guess which one of us is doing such a thing? (hint: not me)
“You can go back and look up marginal costs”
I understand marginal costs. Which is why I’m curious as to why your description doesn’t consider them.
But, whine, whine away about me calling you out and continue to make claims without providing a single verifiable fact. Such is your way, I suppose. Just don’t expect me not to call you out on your bullshit next time you spout it.
“We love people sharing Netflix, especially using proxies.”