Netflix crackdown shows cracks in confidence
Read this article for free:
Already have an account? Log in here »
To continue reading, please subscribe:
Monthly Digital Subscription
$4.75 per week*
- Enjoy unlimited reading on winnipegfreepress.com
- Read the E-Edition, our digital replica newspaper
- Access News Break, our award-winning app
- Play interactive puzzles
*Billed as $19.00 plus GST every four weeks. Cancel anytime.
It may come as some surprise to Netflix customers that the industry leader in video streaming still mails out DVDs to some of its customers around the world.
Netflix, of course, revolutionized home entertainment in 1997 when it began sending DVDs directly to customers who had been going to the video store. Maintaining this service is both a tribute to the business model that — just a decade later — laid the foundation for the Netflix we know today, and an example of Netflix’s supreme confidence in its place on top of the streaming world.
Today, however, that confidence is waning. Suddenly, the streaming industry’s disrupter has found itself among the disrupted.
This month, Netflix began a pilot project in Canada, New Zealand, Portugal and Spain to crack down on password sharing. Now, if you want to access your account somewhere other than your home address, you have to pay $7.99 for two “extra member sub accounts” that can be accessed from anywhere.
Reaction to the pilot project has been swift and severe.
Social media erupted across Canada with Netflix customers outraged about the crackdown, and that this country had been used to determine just how many people will cancel their subscriptions under the new policy.
As a publicly traded company, Netflix will at some point have to fess up about the impact of the password clampdown. But to date, all we have to gauge the new policy is the ubiquitous howling on social media platforms.
The bigger, broader question is: can Netflix survive an existential threat of its own making?
When it launched digital streaming in 2007, it had no real competitors. As the technology improved, and more people abandoned DVDs and moved to streaming, Netflix became a Goliath in the home entertainment industry, powerful enough to draw subscribers in the hundreds of millions worldwide, and to drive a stake through iconic companies such as Blockbuster.
But that was then. Now, Netflix finds itself in a hugely competitive marketplace jammed with streaming services, many that have suddenly found a competitive advantage. While Netflix started out as content distributor that eventually migrated to content creation to keep a steady flow of new movies and shows on its site, many of the newer streaming services were launched by companies that were content creators first, with access to sophisticated production infrastructure and huge libraries of content.
All this competition has already taken a huge bite out of Netflix. In the first half of 2022, the company suffered a net loss of nearly one million global subscribers, triggering a significant drop in share price. The company finished the year strong, drawing 7.7 million new subscribers in 2023 but overall revenue was still well below market expectations.
Netflix believes that by growing subscriber numbers — in part by cracking down on password sharing — it can maintain its spot atop the heap of digital streaming services. It’s a huge wager many market analysts believe will fail.
Netflix’s original password model was based on the whole idea that it would have no real competitors. How else to explain the company’s delay in adding geographic restrictions on access to subscriber accounts? Now, faced with myriad strong streaming services, it’s trying to put that genie back in the bottle. And the genie isn’t happy.
The great disrupter of digital streaming is now fully and completely disrupted. If its password crackdown doesn’t work, Netflix may find itself joining some of the companies it dispatched to the great corporate beyond.