As the world’s leading streaming platform, Netflix has made a significant impact on the entertainment industry. However, the company recently announced a new account sharing policy that has sparked a lot of debate and concern among its subscribers. This policy will limit the number of simultaneous streams allowed on a single account, which could potentially harm the platform’s subscriber base. Here, let’s explore the impact of this new policy from both a marketer and economist perspective.
Decreased Word-of-Mouth Referrals: One of the key factors that could be affected by the new account sharing policy is word-of-mouth referrals. By limiting the number of simultaneous streams allowed on a single account, this may discourage users from sharing their accounts with friends and family. This could lead to a decrease in personal referrals and a drop in new subscribers, as users may be less likely to recommend the platform to others. I know they’ve also recently launched “Basic with Ads” account, but how it’s able to profit or how it benefit sales/awareness from brands still remain unclear. After all, users can stream somewhere without the ads.
Customer Churn and Negative Brand Perception: Inability to share your account whenever possible could also lead to frustration and dissatisfaction among current subscribers. If users feel that the new account sharing policy is too restrictive, they may cancel their subscriptions and opt for alternative streaming services. This could lead to negative brand perception, as users may view Netflix as a less attractive option compared to its competitors. For most of their subscribers, downloading or streaming shows from other “sites” is an option, but would rather subscribe and pay for convenience. If this will be taken away, then a reconsideration of their subscription might happen. I think we can also all agree that it’s not just Netflix where they’re keeping a subscription.
Decreased Demand for the Service: Limiting the number of simultaneous streams on a single account, Netflix is hoping to encourage more users to subscribe to their own accounts. However, this in turn could have the opposite effect, as users may opt for cheaper alternatives that offer more value for their money. As users may be more likely to cancel their subscriptions if they feel that the service is not worth the price, this can lead to a decreased user engagement if there are limitations imposed on their account (Increased price elasticity). Netflix may have to reconsider its pricing strategy to maintain its subscriber base.
Potential for Decreased Revenue: Ultimately, the new account sharing policy has the potential to decrease Netflix’s revenue, as it may result in a decrease in subscribers and a decrease in demand for the service. The company may have to weigh the potential benefits of the policy against the potential drawbacks in order to determine its overall impact on the business.
Netflix’s new move to control account sharing has the potential to impact the company’s subscriber base in both positive and negative ways. While this aims to increase revenue and profitability, it may also discourage users from sharing their accounts and lead to customer churn and negative brand perception. In my next post, I will be sharing why this new policy can potentially improve Netflix’s business model and revenue. But for now, it will be interesting to see how this policy plays out in the long-term and what kind of impact it will have on Netflix’s subscriber base.