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Netflix is accelerating its timeline to begin cracking down on users sharing passwords as it also prepares to launch its first ad-supported streaming tier.
Despite famously telling subscribers years ago that it was cool with password sharing, over the past few years, Netflix has been exploring ways to prevent this. That’s not surprising since even though Netflix may want to seem accommodating, password sharing cuts deep into its bottom line.
It also doesn’t help that Netflix’s revenue isn’t doing so well these days. A few weeks ago, the company announced its first drop in subscribers in over a decade, telling investors to expect revenue growth to slow down a bit.
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Netflix is now looking for ways to bolster new signups to get its subscriber numbers back up. It believes one of the most obvious ways to approach this is to encourage freeloaders to actually start paying for the service.
Netflix has always made it clear that password sharing should be a household-level thing, and it’s really not all that cool for you to give out your Netflix password to your extended family and circle of friends. While college-aged kids living away from home are okay to use the family’s Netflix account, that’s about as far as the line goes.
The company has run several trials recently. Initially, it tested blocking users entirely when it detected that they were using someone else’s password. However, more recently, it’s been exploring the idea of simply charging a fee for “Extra Member Accounts.”
It rolled out that trial in March in Chile, Costa Rica, and Peru, following that up with an announcement during the company’s earnings call last month that this would be the new policy going forward.
If you’ve got a sister, let’s say, that’s living in a different city; you want to share Netflix with her, that’s great. We’re not trying to shut down that sharing but we’re going to ask you to pay a bit more to be able to share with her.Greg Peters, Netflix’s chief operating officer
At the time, Netflix said that it planned to go “through a year or so of iterating” on this before it made things final. However, now it appears that the timeline is accelerating.
According to The New York Times, Netflix executives recently told employees that it plans to roll out the changes by the end of 2022, alongside a new advertising-supported tier.
Netflix’s Ad-Supported Plans
After years of insisting that commercials would never appear on the screens of Netflix, CEO Reed Hastings told investors last month in a surprising turnaround that the company would soon begin offering a lower-priced ad-supported subscription tier.
However, Hasting’s initial comments suggested a rather vague timeline, saying only that the company would try to “figure it out over the next year or two.”
Now it looks like the streaming giant has figured it out sooner than expected. In a note to employees the week, the company’s executives said that it’s coming by the end of the year.
“Yes, it’s fast and ambitious and it will require some trade-offs,” the internal memo added, suggesting that it’s moving much faster than it originally planned.
It also hasn’t been lost on Netflix’s leadership that it’s just about the only major streaming service that doesn’t at least have an ad-supported tier in the works. The memo noted that HBO and Hulu have been able to “maintain strong brands while offering an ad-supported service.”
Meanwhile, Disney+ announced its intentions to offer an ad-supported tier earlier this year — and it’s probably not a coincidence that Disney is also aiming to have its new tier ready by the end of the year.
Every major streaming company excluding Apple has or has announced an ad-supported service. For good reason, people want lower-priced options.Netflix note to employees
This will leave Apple TV+ as the only player that doesn’t have an ad-supported tier. However, at $5/month, Apple’s streaming service is already far less expensive than the competition. Netflix is on the other end of the scale, charging $20/month for a service that offers the same streaming quality.
How Much Will It Cost?
Netflix hasn’t shared any details on pricing for this new ad-supported tier, and with the company’s somewhat complicated tiers, it’s hard to predict where this new plan will fit in.
The Netflix plans are already an oddity among streaming providers, with Basic, Standard, and Premium tiers that differ in quality and number of devices that can be used simultaneously.
By comparison, nearly every other streaming provider has only two tiers at most — one with ads and one without. Nobody else charges more for HD or 4K streams.
It’s unlikely Netflix will abandon this business model, in which case it might end up also introducing three ad-supported tiers, making things even more complicated than they already are.
Alternatively, it may decide that the standard-definition tier is already affordable enough and limit its ad-supported tier to only the HD and 4K levels.
Thanks to its limited trial, we have a slightly better idea of what Netflix will charge for “Extra Member Accounts.” The cost for one of these accounts in Costa Rica, which bills Netflix in U.S. Dollars, is $2.99/month, although it’s worth noting that Netflix charges slightly less for Standard and Premium accounts in that country — $12.99 and $15.99 versus $15.49 and $19.99 in the U.S.