Netflix freeloaders on borrowed time as competition ups the ante

It’s been a bad week for your ex-partner’s brother’s girlfriend.

ust as she was starting to get into Peaky Blinders, Netflix has hinted that it’s about to crack down on shared accounts. So that login you lent her when she was in college may be yanked in the coming months.

She’s not alone. The sprawling ecosystem of friends, neighbours and relations that use your account for their evening’s Netflix-viewing looks to be on borrowed time.

Up to now, Netflix didn’t care that roughly a third of its users – 100 million households – watch it using someone else’s account (not just a close family member, but a completely different dwelling).

It was growing really strongly anyway, adding millions of subscribers each year. But its growth has now stalled; it has lost 200,000 subscribers for the first time. So it needs to start doing a bit of housekeeping.

And it’s your cousin, your teenage son’s pal and your mam who look like they may soon be cut off.

How might Netflix do this? In some South American countries, it is running a trial that asks people to pay an extra €3 for people outside the household of account holder – such as extended family or friends – to retain access to the content. The eventual goal here might be to put in place cheaper payment tiers that seem to be less annoying for the sharing beneficiaries if and when it does start cutting those beneficiaries off.

As for the machinery to crack down, it has already started to introduce measures such as two-factor authentication, effectively restricting access to whoever owns the mobile number or email address associated with the account.

It could also consider something approximating location-based credentials, possibly involving IP addresses. I’m sceptical of this one, though, because part of the deal with Netflix is that I can watch it on the bus, in a hotel or in a cafe on a lunch break.

It could just do something simple, such as asking current users to reset their passwords in a one-off measure, a move that would almost certainly lock out millions of extended family, former friends and others who might be too mortified to call you for the
updated password.

This might annoy people, though, prompting some who were considering quitting to go ahead and do that.

But make no mistake: the era of the Netflix free-for-all (emphasis on ‘free’) looks to be drawing to a close.

As much of an irritant as that might be for some, it seems worth it to the company. If just 10pc of those 100 million households currently siphoning off others’ accounts pay, that would yield somewhere between €1bn and €2bn extra per annum in fees.

Even for a company set to spend over €14bn this year on films and TV series, that’s a very healthy incentive to do something. But on the larger point of Netflix’s subscriber growth: could it be in real trouble? Absolutely.

It’s not that the company has done anything wrong. But its competitors are now far, far better than they used to be. Apple, which was nowhere three years ago, just won an Oscar for best movie.

Disney Plus, also not around three years ago, has a guaranteed audience because of its exclusive Marvel, Pixar and Star Wars catalogues. And Amazon Prime Video, while it hasn’t done anything spectacular, has a Tesco Clubcard-like customer retention advantage that’s hard to shift. So far, Netflix has withstood this competition fairly robustly. Last year, it added more than 10 million subscribers, with similar figures for the year before.

And it still seems that Netflix is the tentpole streaming app, around which there are more cultural and entertainment inflection points than any of its competitors.

Over any given six-month period, Netflix still has more hits – shows or movies that are widely discussed – than rival platforms.

In my family home, I asked others which of the four main platforms (we subscribe to all of them) would be sacrificed if we were to cancel one. Apple was the consensus answer, with Amazon next. The one least willing to be parted with was Netflix.

Even still, Netflix can’t avoid the grim and relatively sudden cost-of-living shock that many of us are currently undergoing. In a year when electricity and fuel bills are rising by a third, it was a little unfortunate that Netflix raised its prices by as much as 31pc (over a 12-month period). If it really comes to a choice of turning the heating down or keeping Netflix, I’m not sure the streamer will win.

Despite all of this, there is one hot take about Netflix’s current spotlight that can safely be thrown in the bin. That is that streaming platforms, as a genre, are in trouble. This is unsupported by any reasonable data.

There is no scenario where the world retreats, even slightly, from watching TV and movies online. If you have a broadband connection, you are going to use a streaming platform. If you’re in a family, you’ll have at least two subscriptions, and more likely three or four. (Anyone with kids under 12 will know they don’t have much of a choice when it comes to Disney Plus.)

So whatever else might happen, it’s a fair bet that Netflix will continue to dominate our movie lives for the immediate future.

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