How Netflix’s Crackdown on Password Sharing Could Backfire

In May 2023 Netflix expanded its crackdown on password sharing between households by sending emails to members sharing accounts in the United States. But the prompt to transfer profiles has not been received positively by many users.

While the move is aimed at securing more subscription revenue for Netflix, could the crackdown backfire instead? Here’s a look at some of the potential negative effects that the initiative could have on Netflix.

1. Users Could Cancel Memberships

The most immediate consequence of the password-sharing crackdown could be users simply canceling their accounts rather than opting for profile transfers or additional household account purchases.

Losing goodwill with subscribers could result in further cancelations. But some users may also cancel for more practical reasons. Some account holders only keep their subscriptions active because others are also using the account.

If Netflix stops allowing people to share accounts in a cost-effective way, some users may no longer use the service at all.

2. Netflix Could Lose Viewership Hours

Netflix measures the success of its shows using viewership hours—these hours determine which series and movies are listed in top 10 reports. The success of a breakout series is often determined by how many hours that content was viewed in its first 28 days on the service.

All users on an account can contribute to viewership hours. But if Netflix sheds users who are sharing accounts, the company could see a dip in its overall viewership hours.

This could in turn affect its brand deals and the ability to determine the success of content.

3. New Signups May Be Limited

Some users sharing accounts may opt to take out new subscriptions. But because sharing accounts is usually done due to affordability, these new sign-ups may not be as consistent as the shared accounts.

To save money on online subscriptions, these new users are likely to cancel their subscriptions frequently and only sign up for specific movies or series releases.

4. Netflix Could Lose Market Share

While Netflix is firmly established in many places around the globe, it is also trying to grow in certain regions. This is why Netflix launched a free plan in Kenya in 2021.

But if users can’t share accounts and have to pay extra to create new profiles, Netflix could see a decline in its growth in these regions. There are so many streaming options available as services become more fragmented with exclusive content. So users may opt for other services that do allow them to share accounts outside of their households.

Netflix Is Being Cautious Over Password Sharing

These potential negative consequences are likely why Netflix is rolling out its password-sharing crackdown gradually. But as the company gets stricter with accounts, it may lose the goodwill of loyal users who turn to other services instead.