Survey: Netflix Sub Surge From Password Crackdown Isn’t Over Yet

With the great day of reckoning — that is, Netflix’s crackdown on U.S. password sharing — having arrived at last, it’s beginning to look like the strategy, for all the furor it seemed to cause, was a savvy one after all.

The results of an exclusive two-part survey conducted by CRG Global for Variety Intelligence Platform indicate the vast majority of U.S. Netflix users polled still find the service valuable, and many who didn’t previously pay for their own account are willing to do so.

More than 80% of those surveyed who used the service via someone else’s account said they will purchase (or have already) their own Netflix subscription if their access is cut off. A similar proportion of those who pay for the service said they did not plan to cancel due to the crackdown, despite social media chatter voicing opposition to the new policy.

Early reports on the crackdown’s impact bear this out. According to data from analytics firm Antenna, Netflix had its four single biggest days of U.S. user sign-ups since January 2019 (when Antenna first began tracking the metric) after starting to cut off freeloaders’ access.

While cancellations rose as well — to be expected given the hefty $7.99 monthly fee Netflix now charges for “paid sharing” — Antenna noted they were far outpaced by the new sign-ups, with the ratio of subscriber additions to losses rising more than 25% versus the previous 60 days.

Indeed, survey data shows relatively few password sharers balked at being asked to pay more. In CRG’s first survey for VIP+, conducted before Netflix unveiled the $7.99/month price point, nearly 75% of account sharers said they were willing to pay more to continue the practice. This figure dropped to 66% in the second survey after the price point was announced.

In short, as I’ve argued before, reports of Netflix’s demise after its troubles last year were greatly exaggerated. This shouldn’t come as a surprise. After all, Netflix consistently ranks as one of the most liked and most used services in consumer surveys and still boasts the largest user base of any SVOD service both domestically and worldwide. (Not for nothing, its stock price has also steadily risen again over the past 12 months, recently surpassing $400 for the first time in more than a year.)

The question that emerges now is twofold: What does this success mean for Netflix, and what does it mean for the larger streaming field?

The current subscriber surge does not change the fact that Netflix is shifting into a mature, slow-growth company, more like a cable provider than the tech disruptor it was during its insurgent phase. Whatever spike in revenue growth the password crackdown produces this quarter will not be replicable, and investors should resist any temptation to view it as a sign of further growth potential. It’s a win for Netflix, to be sure, but one from which Wall Street will move on quickly.

As for the rest of the SVOD field, one might assume Netflix’s success with curbing password sharing will inspire other services to do the same, as they’ve so often cribbed from the Big Red N in the past.

But Netflix rivals are far more vulnerable to churn if they do crack down on account sharing, given consumers already often cycle through these services month to month. Many of them are still struggling to establish their value to subscribers. Place additional restrictions on these users, and many will likely decide they don’t need the service anyway.

Furthermore, as Netflix knows all too well (remember “Love is sharing a password”?), account sharing is a valuable marketing device when trying to grow one’s user base, drawing consumers into the ecosystem and, hopefully, converting at least some of them into paying subscribers. That’s something the smaller players, in particular, can’t afford to sacrifice at this juncture.

That said, with the financial pressures facing the traditional studios at the moment, it would not be inconceivable for some (most likely those with an international presence) to experiment with the practice. (It also wouldn’t be surprising to see Amazon crack down on sharing for its Prime subscriptions, given the tech giant’s scale and value to consumers.)

These services will have to assess how much of their target audiences they’ve already acquired, how valuable they are to those audiences and, ultimately, whether the gains of a crackdown would balance out the losses. I’d wager the answer for most of them will be no, but we should all know by now to never say never with regard to streaming.