Last February Netflix reached 200 million users and its shares are up nearly 50% in one year. And Disney +, the newest actor in the VOD war, has managed to have 100 million subscribers in the barely 2 years that it has been in with its service activated.
Sharing accounts outside the VOD service rules
Among the plans of the different VOD services we have the power to share the account among several people, but always with limitations and control. As Netflix itself reviews on its website, “only people who live with you can use your account.”
If you have an account shared with friends or family, it is legal, although if it is not within the same house, it is not legal according to the terms of Netflix.
And the same with the rest, but in practice the most common is to share an account among several, paying for it among all – whether or not they live in the same house, or even they are relatives or not.
Last 2019, at a conference on financial results, Netflix CPO Gregory K. Peters made it clear that they were studying the way to end the practice of paying standard and premium accounts between several and using them in different households.
Because streaming content services lose money every time an account is shared in violation of their terms and services. In fact, Netflix tested systems like verification codes with a few of its subscribers in March 2021.
Ban account sharing on Netflix in 2022
According to The Washington Post, a limited group of people received a strange message on their televisions. According to this medium and the screenshots that have appeared on the Internet, it said something like: “If you don’t live with the owner of this account, you need your own account to continue seeing it.”
Turns out that Netflix is testing a new feature that, through this pop-up message, warns people who share their password and who do not live with the password owner, that they have to pay their own bill.
Apparently they are asking users to verify that they are the holders or a member who has direct access to the same password, asking them to enter a verification code.
They send this code by text message or by email, but still offer the possibility to verify it later or simply ignore the message.
However, there is still an option for those who have been passed the password and do not have an account of their own, since the streaming giant would be offering a free initial trial, something that they had removed a while ago and that could motivate them to to subscribe.
Invest in growing own catalogs
Sharing passwords is estimated to cost streaming services several billion dollars a year in lost revenue. This is an issue that must be addressed as spending on distinctive new programming skyrockets.
And it is that VOD platforms, with their skyrocketing use, have seen the need to increase their production of their own exclusive content – which, as in the world of video games, determines the success of a system.
For example, the upcoming Amazon series “The Lord of the Rings” will apparently cost 450 million dollars only in its first season, more than four times the cost of a season of HBO’s “Game of Thrones”.
That price tag is a rarity in itself of how high it is, but by and large companies are spending dizzying sums to produce their own original movies and shows and differentiate themselves from their competitors.
Disney + said it will spend up to $16 billion a year in new content for Disney +, Hulu and ESPN + until fiscal year 2024. According to estimates by the research company Bankr, Netflix would have spent $19 billion in original content in 2021.
This higher spending needs a higher profit to maintain itself, therefore several services did what users hate the most: Raise the price of your subscriptions.
Netflix raised the price of its most popular plan by a dollar in October 2020, to $ 14 a month. Disney + raised its own price of $ 1 a month to $ 8 in March 2021, when it released the entire STAR catalog.
“Spending on programming is doubling, or in some cases tripling and quadrupling, so it has to be funded somewhere,” says Tuna Amobi, an analyst at investment expert CFRA.
“Most services have losses over the next few years before breaking even. So all the fertilizers they can get are good for them.”
According to the Pew Center for Internet and Technology, approximately 2 out of 5 adults online have shared VOD account passwords with friends or family. And among the Millennial generation the figure is even higher: 56% of online adults ages 18-29 have shared passwords.
According to another study, more than a quarter of video streaming services are used by multiple households. That includes that a family or a friend share the bill they pay outside the home. It is less common for multiple households to split the cost.
And 16% of all households have at least one service that is paid for in full by someone else, according to the Leichtman Research Group study. This digit increases to 26% in the case of young people between 18 and 34 years old.
They lose billions a month
Sharing or stealing passwords for streaming services cost an estimated $ 2.5 billion in revenue in 2019, based on the most recent data from research firm Park Associates. It is expected that figure rises to nearly $ 3.5 billion by 2024.
That may be a small fraction of the $ 119.69 billion that eMarketer predicted people would spend on subscriptions of video only in the United States during the past 2021. But subscriber growth is slowing and costs are rising.
It is a difficult balance. Video companies have long offered legitimate ways for multiple people to use a service, creating profiles or offering service levels with different levels of screen sharing.
Stronger rules on password sharing could encourage more people to pay full price for their own subscription. But too strict a measure too it could alienate users and scare them away.
According to Tuna Amobi of the CFRA pointed out last May, Netflix and company “are going to take a very cautious approach to this. If handled incorrectly, there is always a downside to a move like this”.
It follows from all this that there will be no quick and easy solution. What other steps will VODs take in the middle of their war for the public’s favor?
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.
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