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April 8, 2024

Do Password Crackdowns Help Or Hurt Streaming Services Like Netflix?

Despite the many controversies regarding the matter, many streaming services have gone ahead with cracking down on password sharing. Do such measures help or hurt streaming services? By: Kritchanon Tan Kian Wei

During the early days of streaming, password sharing was a largely ignored “secret” that companies knew about but did not take action towards. However, as streaming services became harder to sustain due to increased competition along with ballooning TV budgets and lower episode counts, many services like Netflix, Disney+ and Max have announced plans to crack down on password sharing so as to make their services more profitable by charging consumers an extra fee for sharing an account with someone outside their household.

Ever since Netflix started testing password crackdowns in several international markets, plenty of users online have shunned Netflix for its controversial move, with countless anecdotes of people cutting out the service from their lives being found on social media sites and platforms like Reddit. A 2017 tweet by Netflix which stated that “Love is sharing a password” even went viral following the backlash. Though the move is blatantly anti-consumer, one can’t help but wonder whether conducting suck crackdowns is beneficial in the long-term for the companies behind the services, given how the move only enrages users.

Though the cracking down on passwords seemed to many users to be a move that will bite the companies in the future, recent reports have suggested otherwise.

In the third quarter of 2023, following the implementation of the Netflix password crackdown, Netflix gained an additional 8.8 million subscribers. Then in the fourth quarter, an extra 13.1 million subscribers joined the service, making it the most number of new subscriptions for any quarter since 2020, the peak of the COVID-19 pandemic that saw many signing up for streaming services due to being stuck at home. 

This massive increase in subscribers is unlikely to be attributed to the release of highly-anticipated content, as even the quarters where hit series like Squid Game (2021) and the 2022 fourth season of Stranger Things released did not manage to pull as many subscribers to the service as the quarters following the password crackdown.

As much as it’ll anger consumers, it’s hard to deny that cracking down on password sharing helps streaming services gain subscribers. After these numbers were revealed, it’s no longer surprising that competitors like Disney have announced their password sharing crackdown plans, with Disney+ beginning their crackdowns in select markets in June 2024 before expanding the crackdown globally in September 2024.

Perhaps, however, not cracking down on password sharing can be beneficial during the early stages of a service, as the sharing of accounts does increase the number of people who become aware and familiar with the service. That may have been why streamers have tolerated password sharing for so long, opting to wait for their service to become more of a household name before restricting access. Once a streaming service matures, becoming well-known and having a large user base, that’s when it seems that cracking down on password sharing benefits the company behind a streaming service, much to the dismay of consumers.

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