Shared Netflix accounts are about to be charged more
The online movie viewing platform will collect extra money when users share an account to share with others.
Netflix has just announced that it will expand its payment plan to users who share an account to share with many people. This information was published shortly after the platform released its business report, with the number of paid subscribers falling for the first time in 10 years.
According to TechCrunch, Netflix has been testing the feature in Chile, Costa Rica and Peru since March and plans to expand globally this year. The price Netflix collects about 3 USD/month, will be adjusted depending on the market.
Up until now, Netflix still allows the Premium account package
(Premium) created 4 more profiles to share with people in the same household. The company uses a variety of information such as IP addresses, device information and activity history to determine when there is an account sharing phenomenon for people outside the household.
Netflix said it will gradually implement this fee collection method within the next 1 year to offer a reasonable fee.
According to Netflix, charging for account sharing is the most reasonable measure because it does not ban accounts from sharing passwords and can earn more profits from users.
Netflix's first quarter business report of 2022 shows that the platform has lost more than 200,000 paid users. This is the first time Netflix's subscriber count has decreased in the past 10 years. The platform also expects to lose another 2 million users in the second quarter.
In the letter to shareholders, Netflix expressed that they are well aware that users are sharing accounts with each other for common use. On the one hand, this feature makes users more engaged with the platform. On the other hand, with competition from services like Disney, Warner Bros. Discovery, Paramount Global, Apple TV+, Netflix are forced to charge those who share accounts.
A few years ago, Netflix was quite comfortable with the shared account problem. In 2016, CEO Reed Hastings even affirmed that sharing passwords helps the platform grow.
However, since the number of monthly subscribers has remained flat in recent years, the increasing number of users sharing accounts makes Netflix unable to grow in the long run.
"The growth of rival platforms, along with shared accounts, has caused revenue to decline," Netflix's management said.
Netflix currently has about 222 million subscribers globally and an estimated 100 million households are using Netflix by sharing accounts. In which, the US and Canadian markets own more than 30 million users.
Netflix subscribers increased significantly during the period of isolation, but so far there are signs of decline when the Covid-19 epidemic is gradually becoming more stable.
In the first quarter of 2022, Netflix announced "losing" 200,000 accounts to watch movies online. This does not mean that only 200,000 people left this service to find other solutions in the first three months of the year, but that is the difference, the number of people canceling their Netflix account is more than the number of customers. new products. Within three months, the sanctions imposed by the West on Russia caused them to lose 700,000 customers in this market, plus 600,000 accounts in the US, and 300,000 accounts in Europe and the Middle East. and Africa stopped paying. The storm of Korean movies appeared to help increase the number of accounts in Asia Pacific, but the result was still negative 200 thousand accounts, as reported by Netflix.
For the first time in a decade, the "growth streak" that followed quarters with more users than the previous quarter was disrupted. And as Netflix itself admits that in 2022, the situation will only get worse. This made people start thinking further, which is the future of Netflix. They predict that, in the second quarter, which ends in June, the difference between discontinued accounts and new users will reach 2 million.
The title lines on newspapers and news sites all emphasize that users share accounts with each other, which is completely allowed, based on Netflix's service usage regulations. That emphasis makes many people think that sharing acc is the only reason why Netflix suffers. Is that true?
Consequences after Netflix reported first-quarter financials: In just one day, Netflix's stock value jumped 25% in after-hours stock transactions. "It's going to be very clear from now on Netflix's quarterly results are going to be tough," said Tony Gunnarsson, chief strategist at Omdia.
Netflix's quarterly business report is actually the last straw. Two days before they published their main report, market research unit Kantar released a research report, which aggregated market data in the UK. They found that in the last 3 months, 1.5 million families stopped a movie service or online content, and 38% of them stopped buying online movie accounts to cut their living costs. family. Kantar wrote in the above report: “What this study finds demonstrates that UK families are looking for proactive ways to cut the cost of living, and the market for paid video-on-demand services. (SVOD) is being impacted by this process.”
Coincidentally, this report comes shortly after Netflix raised prices twice in 18 months in the UK.
At the same time, another market study from Nielsen also showed that half of the respondents felt overwhelmed with the number of streaming services available on the market. When new names like HBO Max, Disney+, Apple TV+ or Paramount+… jump into the race, the vast majority will choose one way: Find yourself the service with the most suitable movies to buy monthly service, and skip the rest of the services.
The most important thing when predicting the future is that after the explosion of streaming services, which ones will survive, which ones will be shut down by the parent corporation. At the center of this storm is Netflix, the world's largest streaming service, said Julia Alexander, senior analyst at Parrot Analytics. No matter how well prepared they are, it will still suffer when all the rest of the services attack at the same time to grab market share.”
Ms. Alexander believes that Netflix has the financial strength to fight all the new "players" jumping into the race to watch movies online, but the weapon to do this certainly cannot be just a movie library. that they own. Disney, Paramount, and HBO all have well-deserved libraries of TV series and movies to choose from when purchasing an account. Amazon has just acquired MGM, making their Amazon Prime Video an equally formidable name.
Meanwhile, it feels like the original movies that Netflix splurges on are getting worse and worse.
But at that time, instead of diversifying the movie library, Netflix chose to diversify its business model, to target all 4 main customers: Male, female, under 25 and over 25 years old. “But at the same time, they also recognize competitors that are getting bigger and bigger. They have to find a way to once again revolutionize cinema as they did years ago,” Ms. Alexander said.
Of course, expanding a business costs money, and that's exactly why in some areas Netflix rates have increased, not just once. Gunnarsson said that, from an analyst's point of view, SVOD services are still worth the money, despite the price increase. You can watch all the content you want, anytime, anywhere, without limitation. According to Omdia, the average UK family subscribes to 2 SVOD services at the same time, while in the US the average is 4. At least for now, Netflix, like Amazon on e-commerce, is the default choice for many People. Those who are rich can learn and try smaller services, But the "default service" can be completely changed.
With 75 million households subscribed to Netflix in the US, Ms. Alexander believes the service is close to peaking in popularity: “What a service like Netflix is trying to do is re-engage old customers. , who are switching to try other services like a month or two.” And the content for them to do this, can basically be divided into two main types:
Children's entertainment, reality shows that cater to married subscribers and young children.
High-cost series and movies to entice old users back to the service.
But, with a Churn rate of only 2.2% according to market surveys, the percentage of people who completely abandon Netflix to use another service is very low. And while there's still a lot of room for Netflix to grow in other regions, like Asia, there's basically no customer in that region that's generating as good revenue as the US market. For example, Disney+ Hotstar service in India, Brazil and Mexico, each customer brings Disney about 1.06 USD in revenue, while in the US, their revenue per customer is 6.13 USD. Multiply this number by tens of millions of service users, you will see that the difference is too large.
Then when a market reaches saturation, can't find new users, what to do? Increase the monthly service price and you're done!
In the midst of a time when the world economy is in a period of lack of confidence more than ever, with the prices of food, necessities, and energy all skyrocketing, the increase in service prices is easy to cause negative effects. reverse. Instead of accepting to spend more money for Netflix, in order for them to achieve their revenue goals, users completely have the right and ability to quickly cut the service. That's when another solution came in: Cheaper service packages, fewer movies, and ads.
In 2021, HBO Max already does this, with a $9.99 plan, cheaper than the standard $14.99 plan. Disney+ is planning to do the same, showing movies with ads later this year. "Logically, the competition will make streaming services move towards a hybrid business, combining SVOD and AVOD (video-on-demand with ads)," Gunnarsson said.
At least those are the reasons experts believe they are causing Netflix's user base to decline. The story has absolutely nothing to do with people buying Netflix accounts and sharing with friends or family members, but on the contrary, customers in the most lucrative markets are asking, Why pay full price to watch movies, when you can choose a cheaper package with ads? That's also why, for the first time in history, Netflix is thinking of creating a lower-priced, ad-supported package in the near future.