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Evercore ISI senior managing director Mark Mahaney discusses Netflix’s changes to its subscription strategy and Amazon stock popularity.
Netflix is enforcing tougher policies on sharing accounts. While the company is applying the new rules only in select markets, it could signal a wider rollout.
The streaming company currently allows people who live together to share their account via separate profiles and multiple streams. For example, Netflix allows two screens watched at the same time for the Standard plan and four screens for the Premium plan.
"While these have been hugely popular, they have also created some confusion about when and how Netflix can be shared," Netflix’s Chengyi Long, Director, Product Innovation, said in a post titled, "Paying to Share Netflix Outside Your Household."
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The Netflix logo is seen on the Netflix, Inc. building on Sunset Boulevard in Los Angeles, California on October 19, 2021. (ROBYN BECK/AFP via Getty Images / Getty Images)
In an attempt to rein in the beyond-the-household use and account sharing, Netflix is instituting new policies.
"So for the last year we’ve been working on ways to enable members who share outside their household to do so easily and securely, while also paying a bit more," Long said in the statement.
The "features" are being tested for members in Chile, Costa Rica, and Peru. The upshot is, for an additional fee, a primary account holder can add up to two users outside their household, as spelled out by Long:
Add an Extra Member: Members on our Standard and Premium plans will be able to add sub-accounts for up to two people they don’t live with – each with their own profile, personalized recommendations, login and password – at a lower price: 2,380 CLP in Chile, 2.99 USD in Costa Rica, and 7.9 PEN in Peru.
Transfer Profile to a New Account: Members on our Basic, Standard, and Premium plans can enable people who share their account to transfer profile information either to a new account or an Extra Member sub-account – keeping the viewing history, My List, and personalized recommendations.
Needless to say, users aren’t happy, as a stream of Twitter protests shows.
"Context: Netflix is now charging people for sharing your account with others outside your household. That, in addition to the rise of their monthly fee, is making customers cancel their subscriptions," as one tweet insisted, garnering almost 15K Likes.
One of the burning questions is, how enforceable is this new policy?
"Netflix has had the capability to reasonably determine subscribers who are account sharing for a while now," John Hellickson, Field CISO, Executive Advisor, at Coalfire, a cybersecurity company, told Fox News.
Netflix CEO Reed Hastings. (Getty Images / Getty Images)
"They currently track many details for all viewing activity such as the viewer's location via their IP address, the type of device used while viewing, the titles being viewed as well as the date and time of all the activity," Hellickson said.
"Using VPN [Virtual Private Network] technology can make this more difficult for Netflix to track and limit sharing, but this generally is beyond the skills of the average consumer," he added.
And what’s the long term plan?
"I believe the longer play here will be Netflix's ability to begin to eventually turn off the feature after enough adoption and require all sub-accounts to convert to full paying subscribers," according to Hellickson.
In essence, it means increased revenue now but it’s also a way to increase revenue down the road, Hellickson added.
The games, which are included with subscriptions and come with no ads, additional fees or in-app purchases, can be played on multiple devices within the same account and utilize the same parental control features in kids’ standard Netflix profiles. (Netflix / Getty Images)
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But Netflix also risks losing subscribers, Michael Pachter, a research analyst at Wedbush Securities, told the Wall Street Journal.
"I believe that a crackdown on password sharing is going to increase churn," Pachter said.
All this comes as Netflix faces increased competition from Disney+, HBOMax and Amazon’s Prime Video.
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And it comes in the wake of Netflix raising the price for its monthly plans in January. The basic plan for U.S. customers increased $1 to $9.99, while the standard plan was hiked to $15.49 from $13.99 and the premium plan $2 to $19.99.
Netflix did not respond to a request for comment.
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