Earlier this year media streaming giant Netflix served notice that it was planning to crack down on password sharing by account holders. For some this came as a bit of a surprise as the company had at one point promoted the notion of sharing accounts so others could enjoy the movie streaming platform.
Netflix was initially leery of implementing a crackdown in its two most important markets, the United States and Canada. Wanting to be sure that such a move wouldn’t harm the brand to any significant extent, nor negatively affect the Netflix share price, the company first tested the move in smaller markets.
After all, in Canada a ban on account sharing would be following on the heels of subscription rate increases, a double whammy for some. Anticipating a degree of blowback from unhappy customers, Netflix decided to deploy an advertising-supported tier at a much reduced price compared to that of the regular service. This service plan was first made available in November 2022.
Of course there was no certainty that a Netflix ad-supported tier would even fly, even at just five minutes or so of ads per hour. Would consumers used to a la carte, all you can view, uninterrupted even consider a service with a reduced content range and programming chopped up into segments by commercials? Not only that, but Netflix and other movie programming is typically not created around anticipated commercial breaks.
For the ad-supported Netflix tier, at least in Canada and other markets with the option, the answer for now appears to be that yes there is indeed considerable market demand. Although the company reported only five million subscribers on this tier out of more than 230 million subscribers in total, Netflix says that around a quarter of all new signups choose the ad-supported plan.
As of this writing Netflix has three pricing tiers in Canada (it recently eliminated a low resolution 720p plan). The existing plans and their monthly rates are:
- Standard with ads, 2 sets: $6
- Standard, 2 sets: $16.50
- Premium, 4 sets: $21
All plans offer at least 1080p (so-called HD) streaming. Premium includes 4K and HDR where available in the programming, along with spatial audio. The ad-supported plan requires a date of birth for the account holder for the purpose of tailored advertising. All plans also carry the restriction “Only people who live with you may use your account.” It is this wording that drove some Netflix subscribers apoplectic.
When the company first announced its account sharing crackdown for Canada earlier this year, social media services lit up with subscription cancellation posts, and a casual reader could be forgiven for thinking that this was the end for Netflix. Of course, the company had tested the waters carefully elsewhere, and anyone who kept an eye on the share price already knew that the experiment was working in favour of Netflix. In short, Netflix was seeing net subscriber growth following the crackdown.
Among the loudest outcries were those from parents sharing their Netflix access with older children who had moved away for post-secondary education. Similarly unhappy were elderly viewers who used accounts of their adult children, or vice versa.
Netflix came up with a solution of sorts in the form of “extra member slots,” where an existing subscriber pays $8 a month for another household’s access to Netflix. The standard plan permits the addition of one extra member slot, whereas the premium plan permits up to two.
Also smelling a financial opportunity in light of the Netflix success is Disney. Recently resurfaced CEO Bob Iger, speaking on an earnings call in August, essentially said a crackdown is coming for the popular Disney+ streaming service: “Later this year, we will begin to update our subscriber agreements with additional terms on our sharing policies, and we will roll out tactics to drive monetization sometime in 2024.”
Translation: our policies aren’t clear now but they soon will be, and if you aren’t in the same household as the subscriber you will need to pay up.
Let’s face it. While linear TV has declined in popularity, in many cases through cord-cutting, the savings realized in streaming-only households are slowly being whittled away, be it through password sharing crackdowns or through ever-spiraling subscription rates.
Have you cancelled your cable TV subscription? Have you dropped one or more streaming services due to increased rates or account sharing rules? Have you changed or dropped your Netflix subscription? Let us know and we may include your response in a future column.
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