Netflix (NASDAQ: NFLX) plans on being less chill in the future. With new streaming services on the rise, like Apple TV+ (NASDAQ: APPL) launching on November 12 and Disney+ (NYSE: DIS) launching on November 1, Netflix will have strong competition on the horizon. With the new deals and packages that these new streaming services plan on offering customers, Netflix will likely not see the same growth in subscriptions that other streaming services will see coming ahead. According to Fast Company, Netflix has already found all the customers it would be able to attract in the U.S. As a result, Netflix's last option to continue its growth of its subscriber base is to make changes to password sharing.
The purpose of Netflix's password sharing was so that customers can share their subscriptions with friends and family within the same household. Netflix wanted to make it so subscribers could create multiple profiles and watch various shows on different screens throughout a single house. However, customers had something else in mind. Netflix customers started to share their password with their friends and families of different households so those Netflix watchers wouldn't have to pay for it. This may seem like a victimless crime, but Netflix has lost more than one hundred thirty-five million dollars each month due to password sharing. About 10% of customers share their password, meaning that 13.7 million people are not paying nine dollars and ninety-five cents a month. According to Magid, a research company, millennials are the biggest password sharing offenders. 35% of millennials are password sharers while only 19% are Generation X and 13% are Baby Boomers. Netflix is not the only streaming service suffering from password sharing, but has definitely felt the biggest impact from the issue.
During the company's quarterly earnings call, Netflix has stated that they are aware of the password sharing problem. Netflix's Product Chief Greg Peters said he is aware that some users are avoiding Netflix's monthly subscription. During an interview, Peters was asked how the company plans to address the password sharing issue without driving away their users. "We continue to monitor it," Peters said, "So we're looking at the situation, and we'll see those consumer-friendly ways to push on the edges of that. But I think we've got no big plans to announce at this point and time in terms of doing something differently there." Password sharing has been under the company's radar for a long time. This is why the streaming service already limits the number of devices that can stream from one account. However, doing something dramatic about the issue is a very delicate dilemma.
If Netflix takes very harsh action, they might unintentionally not only get rid of their users that don't pay but also the users that do. Netflix didn't go into detail about how they would monitor password sharing, but two-factor authentication and IP address monitoring are two options Netflix has. The streaming service has recently announced that they have added 6.77 million paid subscribers last quarter. As a result, password sharing will most likely continue until Netflix takes a significant loss in profit.