The global streaming industry experienced its golden era three years ago when Covid gripped the world and all countries announced immediate lockdowns.
This made people look towards indoor entertainment, turning to music and video streaming. As a result, music and video streaming growth spiked.
Fast forward three years later, the same services are seeing a contraction in their number of customers as well as revenues.
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The resulting losses have forced various streaming platforms to employ alternate means increase revenue in order to keep companies afloat.
Streaming giant Netflix did so by earlier allowing advertisements on its platform and later by announcing a crackdown on password sharing.
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This new cheaper tier for subscribers would stream advertisements in between streaming, in an effort to bring in advertising revenue and reduce company losses.
Following that, last year, the tech company also announced they will be cracking down on password sharing of users and earlier in May 2023, it began implementing the strategy in the United States.
In an email to its users, the company clarified that “a Netflix account is for use by one household. Everyone living in that household can use Netflix wherever they are and take advantage of new features like Transfer Profile and Manage Access and Devices.”
“Buy an extra member. You can share your Netflix account with someone who doesn’t live with you for $7.99/month more.”
To implement this, the company aims to track IP addresses and device IDs of internet equipment of a user and it will allow Netflix account to work only on that device. This way, a person using the password out of the said household will be locked out of the streaming service.
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However, there are massive problems with this kind of model.
If a person travels to another city, they will be unable to access the content.
Therefore, this will introduce an added hindrance to frequent travellers. Moreover, this move will also block access to content on public networks such as those in coffee shops.
For someone changing residences, it will turn out to be a hassle to re-register on Netflix with a new network. Families using a single account and living in different cities or countries will need multiple accounts after this strategy comes into effect.
To a layman, this strategy seems like a farce. It seems to be another way to enhance revenue. Adding a family member now costs $8 per month which is a significantly high price to sponsor just one person.
Alternately, for a smaller fee, a person possessing a basic account can easily upgrade to a standard tier and someone with access to a standard tier can upgrade to a premium subscription.
Netflix stated that “extra members have their own account and passwords, but their membership is paid for by the person who invited them to share their Netflix account. Your plan determines how many extra member slots you can add”.
This will trigger privacy concerns as well because a tech giant will begin tracking internet devices of consumers.
Already the announcement of crackdown on password sharing has sparked massive cancellations by users.
The consumers will now be encouraged to flock to online streaming websites that are usually free. This will cause an additional loss of subscribers to Netflix that is already struggling for revenue.
In low income markets such as Pakistan, piracy of digital content is rampant and Netflix’s new strategy will give it a fresh push.
A lack of high-rated new series and cancellations of shows after a few seasons is also discouraging customers from using Netflix.
The crackdown on passwords has given an opportunity to Netflix’s competitors to fill the gap created by the latest announcement.
However, if the same strategy proves successful for Netflix, other streaming platforms will be quick to implement it as well.
Just like in the past, Netflix has taken a risk again and only time will prove how effective it will be.
The article does not necessarily reflect the opinion of Business Recorder or its owners
The writer is a Senior Sub Editor at Business Recorder (Digital)
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