Is Netflix banning password sharing? Real reason behind pay per user model

Over the last few months, streaming giant Netflix has made some big changes to recover its lost revenue and subscriber base. The company believes that account sharing, with multiple users sharing the password for a single account, is a major reason behind this.

Netflix co-founder Reed Hastings already hinted last year that they would be looking to put an end to password sharing. The process has already begun in a phased manner in certain countries and is set to ramp up in the coming days. It's unclear what the final solution will look like, but the company has already started experimenting with alternate methods.

Many are surprised by the recent decisions made by the platform, and some speculate that financial constraints and a decline in subscribers may be behind the changes.

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Netflix has already stopped password sharing in some regions and could soon implement the restrictions worldwide

Sharing Netflix accounts is not uncommon, and the company even offers plans that reduce the cost per person for multiple users on a single account. However, some users take advantage of this by sharing accounts that are not intended to be used by multiple users.

Netflix's financial performance has declined in the last few years, despite other OTT platforms having grown during the pandemic. Reed Hastings believes that curbing password sharing will allow them to add 10-15 million new subscribers, even if they lose some viewers initially.

The site had a positive Q3 in 2022, but their overall performances have been worse compared to last year. The number of subscribers and net profits have decreased since 2021, primarily due to a challenging first half of 2022.

The streaming platform hopes that their upcoming changes increase the number of subscribers. The move is also catered chiefly towards markets like India, where the platform hasn't been making much of a profit, despite offering more lucrative monthly plans. By ending free password sharing, Netflix believes it will be able to monetize those accessing its content by making each user pay for their own subscription.

Based on multiple reports, the restriction on password sharing could become global by March-April this year. The site has already introduced paid password sharing in countries like Costa Rica. While users can share their accounts, each person has to spend an additional $3 to get access. This amount is expected to vary from country to country, but the solution seems quite clear.

Apart from subscription blocks, Netflix has experimented with several methods to increase revenue, including introducing a cheaper ad-supported tier in the United States. However, problems have persisted for the site in both developed and emerging markets.

It appears that Netflix has yet to find the optimal balance to ensure long-term profitability and sustainability. Implementing measures to stop password sharing will be challenging, as proper identification will be necessary. The company plans to use IP and account data to distinguish between family and non-family access, which may allow them to quickly roll the system out. However, it remains to be seen when these changes will be implemented worldwide and how effective they will be in achieving Netflix's goals.