Netflix’s password-sharing campaign is putting college students on edge

With Netflix inches closer to rolling out password-sharing guidelines in the US, college students with accounts connected to family or friends are preparing to change their streaming habits.

The company said it expects new password guidelines in the coming months, though it didn’t provide details on what that would look like. Netflix in February outlined password-sharing protocols for users in Canada, New Zealand, Portugal and Spain that invite users to set a “primary location” for their Netflix accounts — which adds an additional monthly fee for out-of-home sub-accounts. “

Although Netflix hasn’t said whether the US plan will eventually resemble these earlier changes, some fear the crackdown on password sharing could destabilize broadcasts for college students who just left home, as well as burden low-income students and their families. .

Sam Vigil, a sophomore at Mercer University in Georgia, said access to Netflix is ​​required for many of his classmates’ classes. Vigil, who uses his mother’s account, said nearly everyone he knows at school watches Netflix, though he and some friends might stay away from the platform if the password ends up being shared.

“Without Netflix, I would have had to find a way to compensate for the classes, but the only other way I can compensate is to go to another streaming platform,” Vigil said. “My parents pay for three kids in college. They have all of their own expenses. They pay all of our car payments, all of our phone bills, so they don’t have a lot of extra money to spend.”

Netflix has always described how it puts subscribers first. However, incremental changes in password sharing have created uncertainty for college students who may not have income available or are willing to spend it on their own subscriptions.

Netflix spokesperson Kumiko Hidaka directed CNBC to the company’s past announcements for information on its previous steps, but declined to comment further. Chengyi Long, the company’s director of product innovation, said in February More than 100 million households They were involved in accounts amounting to about 43% of the company 231 million Paid global memberships starting this month.

according to Survey 2022 by Parkes Associates, 40% of American households share or use shared passwords, up from 27% in 2019. People in the 18-34 age group, which is 30% of all Netflix users, are more likely to exchange passwords than older viewers. age. Netflix reported 74.3 million paying subscribers across the US and Canada in the fourth quarter.

It’s the streaming platform for almost everyone she knows, said Frisha Sukhraj, a student at the University of Maryland who watches Netflix from her parents’ account. But she worries that the prospective policies might alienate some younger consumers.

Sukhraj suggested that the Student Plan, similar to cheaper subscription plans offered by Spotify, Hulu and Amazon Prime, could allow for more flexibility while accommodating different income levels. However, she remains on the fence about whether she will pay the monthly fee herself.

“Maybe it’s not that expensive, but at the end of the day, saving money is saving money,” Sukhraj said.

Netflix executives acknowledged that while the change should help the company’s financial results, it may not be very popular with users. The paid share model is “very similar to the way you manage price increases,” co-CEO Ted Sarandos said at a conference in December, adding that it would be “really positive in revenue” and “expand in the market.”

But, he added, “Make no mistake, I don’t think consumers are going to like it right out of the gate.”

Netflix said last month that users in Canada, New Zealand, Portugal and Spain can create up to two “sub-accounts” for users who don’t live in the primary location for a monthly fee for each additional user: $7.99 in Canada, $7.99 in New Zealand, $3.99 in New Zealand. Portugal and €5.99 in Spain.

The company hasn’t shared what the US pricing model will look like – if it follows this example.

In the countries listed above, users can also request non-family members to create their own individual accounts by moving their profiles to a new account, which will retain personalized recommendations and viewing history from the original account.

The guidelines follow a trial period in Chile, Peru and Costa Rica that began in May.

Netflix CEO Greg Peters, who became co-CEO in January, said during the earnings call last October that the company has worked on supporting “customer choice and frankly a long history of customer focus.”

However, he said, the company has to balance those goals with the need to “make money.”

For Netflix, the calculus is showing subscriber growth for the monthly fee — and not for the first time. In November, Netflix launched a new tier called “Basic With Ads” that costs $6.99 per month — an offer to get more viewers for less.

Some Wall Street analysts believe that there may be a whirlwind immediately after the US password crackdown, leading to higher growth in the second quarter, followed by potential revenue growth.

Wells Fargo analysts believe that password sharing could be a greater near-term stimulus to revenue than ad-supported entry.

In a note in January, Macquarie analyst Tim Nollen speculated that average revenue per user could rise if enough free users are pushed off the platform and then rejoin paid subscriptions or added as sub-accounts. He told CNBC this week that he expects many users who quit the service to return very quickly given the size of Netflix’s content base, though he expects some initial volatility in the next quarter.

“There are many, many, many American users who aren’t paying for it, and so I think they’re very sensitive to the backlash they’re going to get when they establish this,” Nolen said. “It’s going to take some time to get to the point where they really know what they’re doing and can really start making money from it.”

If Netflix charges extra for sub-accounts in the US, those additional costs could prove difficult for Thuan Tran, a Duke University student from Vietnam who shares his own account with his sister and partner. While he acknowledged that many Duke students have the financial means to support the extra costs, he said significant changes to the subscription structure would make him think twice.

“When your whole mission is that you can share an account with the people you like in different places… and then you can now reverse that and then go and charge more people if they want more profiles or screens, it’s kind of a contradiction,” Tran said. Lots of things that made your site attractive to a lot of viewers.

Even if the subscription cost can go up for borrowers, some college students think Netflix is ​​too important to give up.

Elizabeth Danaher, a University of Missouri-Columbia sophomore studying communications and film, said Netflix enabled her to watch movies with her family in Illinois while she was at school, and especially with her father, who edited “A League of Their Own” and “Home Alone 2.” ” She said it would be “definitely painful” if the cost structure prevented her from accessing Netflix — which she considers an “important source of information” — though she says she and many of her peers would likely be paying a few dollars a month.

“I think at the end of the day, Netflix is ​​probably a necessity for me,” Danaher said.

According to a yet-to-be-released Leichtman Research Group study, approximately 66% of households across the country have Netflix. About 14% of all households with Netflix borrow it from someone else and don’t pay, according to an online survey of 3,500 adults across the US, jumping to 21% for consumers ages 18 to 34.

“What syndication did is help them grow the company, but what it’s doing now, is limiting their potential subscriber growth,” said President and Principal Analyst Bruce Lichtman, adding that Netflix lost nearly 1 million subscribers last year in the United States and Canada.

Lichtman estimates that sub-accounts can cost an additional $3 each, and says that, according to survey data, about half of both respondents and borrowers say they would pay a fee at that rate. About 10% of both categories said they would pay the extra fee but would also look to downgrade their account.

Of those survey respondents who share their login credentials, nearly a quarter said they would abandon Netflix after a policy change that would cost them an additional monthly fee for each sub-account, compared with a third of borrowers. Although, Lichtman said, it is unlikely that this will be implemented to such a degree that people will settle for paying a few more dollars a month under the new policies.

Aravind Kalatell, a student at the University of Missouri-Columbia, said he uses a stranger’s Netflix account logged into his apartment’s smart TV. Kalathil and his roommates don’t know who owns and pays for the account, and are willing to cut off their access without warning should the password restrictions come into effect.

“Ultimately for us, it probably won’t have the biggest impact because our families all have Netflix accounts and we’re going to make it work, but it does add more hassle and inconvenience to something that can eventually be dispensed with with that amount of streaming services out there,” Clathell said.