Why Netflix Doesn't Want You to Password Share
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David Furst: This is All Of It, on WNYC. I'm David Furst, in for Alison Stewart. Chances are, at some point, whether you were using Netflix or another streaming platform, you, or someone you know, borrowed another user's password in order to get around having to purchase a subscription. At least when it comes to Netflix, it looks as though the days of password sharing are over. Recently, the streaming service updated its rules, it no longer allows sharing, and says it will start charging you extra if you share your password.
Netflix estimated that over 100 million users worldwide were using the service without paying. While many users were upset about this change, for the most part, at least for the moment, it seems the crackdown is working in the company's favor. Netflix reported subscription numbers recently rose by 102%, compared to the previous 60-day average. This comes at a difficult moment in the streaming world. There is a lot of competition for our attention out there.
The Wall Street Journal reported Netflix is hoping to cut $300 million in spending this year. Wall Street Journal deputy media editor, Jessica Toonkel, broke that story about Netflix budget cuts. She joins us now to talk about their decision to end password sharing, and also to give us an update on the streaming industry as a whole. Hey, Jessica.
Jessica Toonkel: Hi. How are you?
David Furst: Good. Thank you for joining us. Listeners, are you a Netflix user who has shared your password with someone else at some point? What has your reaction been to Netflix's decision to try and stop password sharing? Help us report the story, and call or text us at 212-433-WNYC. That's 212-433-9692, or you can reach us on social media, @allofitWNYC. Maybe you're someone who accesses Netflix using a friend or family member's password.
Have you signed up for your own account as a result of the sharing crackdown? Why, or why not? Call or text us, again, the number, 212-433-9692. Jessica, talk of this Netflix password-sharing crackdown. This has been going on for a while, that this might be coming, but it finally happened.
Jessica Toonkel: Yes, so they had announced it, I believe, last year, that they were going to be doing it, and they spent a lot of time testing it and making sure that when they did roll it out, they would do it in a way that wouldn't be upsetting to people. It would make it as easy as possible. Netflix has a lot of engineers and product people, so they were testing different scenarios all around the world, to see what would work and what would not work.
David Furst: Well, let's get right to the basics here. What prompted Netflix to make this decision?
Jessica Toonkel: Well, the bottom line is profitability. As you said, Netflix has said they had more than 100 million people sharing passwords. You probably don't know anyone-- You'd be hard-pressed to find a family where someone wasn't sharing a password. As we're going in the streaming era, from focus on subscriber numbers and growth, which is what a lot of these companies have focused on for years, now, it's going to profitability.
Last year, Netflix saw its first losses in subscribers, so they've been much more focused on profitability. They've a lot more competition net today than they did four years ago. This is an easy thing for them to do, to raise revenue per user.
David Furst: Well, what have you heard from inside Netflix, or from users, about their reactions to this change?
Jessica Toonkel: I think inside Netflix-- Again, they have been super cautious about how they did this. I think in the United States, they're pleased with what they're seeing so far. They aren't seeing the outrage, and people are signing up. They are seeing people move to the ad-supported tier as well, which is the-- This is the other piece of it, is that last year, they launched an Ad-supported version, which costs $6,99 per month.
It's actually cheaper for someone just to sign up for that than to sign up for an extra to share your password, which would cost $7,99 a month.
David Furst: Your-- Oh, sorry, go ahead.
Jessica Toonkel: Sorry. In terms of users, I can only speak from our readers, when we write about it, and from my own family, and people are upset. Netflix promoted this for years. Netflix said-- They used to tweet password sharing is love, or something like that.
David Furst: Sharing is caring.
Jessica Toonkel: Sharing is caring, they were okay with it, and it was part of the ethos around Netflix. Now they're taking it away, and people aren't happy about that.
David Furst: You were talking about how Netflix knew that people were sharing passwords for years. What do you know about how much Netflix knows and what kind of data they collect from users?
Jessica Toonkel: Netflix knows what we watch. They know what our tastes are. As you can see, when you turn on your screen, hopefully, you're getting shows that are things you would actually want to watch. That's because Netflix is playing with its algorithm, and it's all based on what you're watching and such. They know what kind of viewer you are. They know when you're viewing, they know how long you're viewing. They know all of that.
David Furst: We're hearing from a lot of you right now, if you would like to join this conversation, you can call or text us at 212-433-9692, or you can reach us on social media, @allofitWNYC. Someone texting right now. "Please ask how Netflix will accommodate divorced families. Will the kids be able to use the login when they're at the other parent's house?"
Jessica Toonkel: That's such a good question. That is something that they were thinking about. That, and also, if you have a second home, how does it work? I believe, and I haven't seen this in practice yet, but I know one of the things they were talking about was letting you let Netflix know, like, "Oh, it's still me. I'm just in this other place." There will be a period of time where, if it's a few days that you're not where you usually are, they will be fine with that.
It's going to be a little wonky, maybe for a bit, but that should be fine. They should be okay with that.
David Furst: We have Reini, joining us from Huntington. Are you there? You had a question?
Reini: Yes. My only problem with this plan is that there are families that are sharing their networks with people with disabilities in their families. Our son is in California, and he's on disability, he has a section 8 housing, but he does not have enough-- He has very, very little money. I think that Netflix and other providers should also screen families that share, whether they are sharing with people who absolutely need to share with.
David Furst: Jessica?
Jessica Toonkel: I think that's a great point. I think that that's something they're thinking about. I think they would probably argue that, for their premium plan, which is $20 a month, you get two slots. They're providing that flexibility of people for sharing. I hear what you're saying, and I think I have older relatives sharing our password, who probably won't know how to figure this all out, it can be an issue.
David Furst: Jessica, here's a question for you from John, in Glen Rock, New Jersey. "I pay for four screens. Do I need to use all four screens in one location? Am I not allowed to travel? Considering dropping Netflix. Nothing keeps me tuned in."
Jessica Toonkel: Yes, you are allowed to travel. They will recognize if you're gone for a little bit, that's fine. If you all of a sudden have four different people watching it from four different places, that's when it's going to set up an alarm, for months at end. If you travel, it's fine.
David Furst: Let's hear from Michael, in West Chester. Michael, thanks for joining us. You think this new plan sounds just fine to you?
Michael: Well, I fully understand and appreciate the objections that some of your former callers had raised, for those who were elderly or income limited, for folks with divorced situations. When we're talking about 100 million, the vast majority of these folks are likely individuals who maybe not fit into those categories. I think it's totally fine and appropriate for Netflix to wish to, as a for-profit company, make sure that they're receiving the profit that they're entitled to.
I have to admit, I've both shared and received passwords over the years, but I knew one day this would come. I think the company has given an ample notice to all of those folks, and again, I think it's fully appropriate for them to do this.
David Furst: Jessica, what about that? Netflix has reported this uptick in subscriber numbers after the crackdown on password sharing. How surprised have you been by the success of the change, at least the short-term success?
Jessica Toonkel: I think I was a bit surprised that you didn't hear more outrage, and that the success happened as quickly as it did. I did anticipate that this would be successful ultimately, and I think Netflix did, too, think that there would be a delay. There would be a few months where people were not happy about it, and then a slow pickup. That was what they had budgeted, was that in the latter half of this year, you would slowly see people start signing up. It is happening much faster than anticipated.
David Furst: Is this a sign of the way things are going to be from now on? Will the other streaming services follow suit?
Jessica Toonkel: I think it's going to be a while before the other streaming services follow suit. Mainly because they're all much younger than Netflix. Netflix has been around a lot longer. All these other streaming services have just come to the market in the past few years. They're still very focused on growth and getting out their ad-supported tiers, and such. I don't think you'll see quite an adamant crackdown from anyone else anytime soon.
David Furst: If you want to join this discussion, you can call us at 212-433-9692. Call us or text there. That's 212-433-WNYC, or reach us on social media, @allofitWNYC. Let's hear from Connor, in Jersey City. You have a comment about this change?
Connor: Hi, how are you? Thank you for having me. Hello, Jessica. I just want to weigh in and gauge your opinion on-- I personally think that this is just-- Not a poor idea, obviously. Netflix provides a valuable service that people love. They should be getting money for the content they're providing, of course. I just don't think it's being executed in the best way. Jessica also said that she's surprised there's not so much backlash, but I remember it was maybe--
COVID mixes the timeline up, but I feel like it was maybe barely a year ago that they had already toyed with the idea of doing this. People were vehemently opposed to this on social media, and they quickly backtracked and said, "Oh, no, we're not going to do this. We didn't mean to say this, we're retracting the statement." That was the whole thing on Twitter at the time. I'm just curious.
This is a company that took off and was able to thrive because they completely tackled the behemoth of Blockbuster, in the early 2000s. By providing a service that was extremely cheap, affordable, easy to use, and very easy to access for everybody, it seems as being a little bit more restrictive now, the way they're handling this situation, in my opinion.
David Furst: What about that?
Connor: I also think that--
David Furst: Sorry, what was that last question?
Connor: The last thing is that I'm not condoning this, I would not do this. I just meant that I know certain people that, with this restriction in their face, will go to other less savory means.
David Furst: Less savory means of accessing all of these series and movies. Jessica, would you like to comment on some of those thoughts?
Jessica Toonkel: It is true. I remember the whole Twitter fiasco, I think it was a year and a half ago, where it leaked that they were looking into doing this, everyone went crazy, and they said, "No, it's just something we're discussing." To be fair, I do think they're trying their best to be as cautious as possible. It is a Wall Street, this is a company that needs to be profitable. It needs to continue to grow.
I do think that this is the right move. The problem for Netflix is that they created the ethos for so long, that it was okay to share passwords, that's where the tension comes. I think if anyone else started doing this, they'd be like, "Oh, of course, you're going to stop that." It was that they had embraced it for so long, almost. Now, they're doing the reverse.
David Furst: That's interesting, Jessica. Another listener texting right now that they feel like Netflix has pulled a bait and switch. They say they don't want to support the company at all. This may work out financially for them, but they've lost customer loyalty.
Jessica Toonkel: There will be a lot of people who feel that way. I think that is the risk that Netflix faces. That some people are just going to be turned off. By the way, they've done a 180 on this.
David Furst: Well, Jessica, last month, you wrote an article for the Wall Street Journal, about how, in 2023, Netflix plans to cut spending by $300 million. Why that number? What's going on?
Jessica Toonkel: Basically, they had planned on rolling out the password sharing in the first quarter, the crackdown on password sharing in the first quarter, and because they were trying to be so careful, they had done this in a few markets and gotten some backlash with the approaches that they were testing. They went back to the drawing board, and it took longer. They've now just rolled out the crackdown. The revenue from that is now coming in the second half of the year.
They're cutting their costs. $300 million is a lot for you and me, but their operating expenses last year were 26 billion. It's something, but not a lot for them.
David Furst: You don't think it's going to lead to dramatic changes and dramatic cuts?
Jessica Toonkel: No. I think that most of the cuts in Netflix have happened, and overall, they're being more frugal than they were, as is everyone, given the economy and markets. No, I don't expect some more cuts.
David Furst: With that, to 26 billion. Are they paying livable wages? Are they planning on paying writers? There's a writers' strike going on.
Jessica Toonkel: You asked two questions. If you work at Netflix, I think you're fine. I think you're living-- Livable wages plus. In terms of the writer strike, every Hollywood studio is trying to figure out, they're at a [unintelligible 00:16:10] right now. They're far apart. The writers, the union, and the studios. I think this is going to be a few more months of this, at least.
David Furst: The Writers Guild of America writer strike is still ongoing, of course, Netflix is one of the major companies involved. How does the story of the strike overlap with the story of this decision to end password sharing, or are these totally separate universes?
Jessica Toonkel: I don't think they cracked down on password sharing because they were worried about the writer's strike, and not having enough content. It all speaks to profitability. All of these issues, if the strike goes on for a very long period of time, these companies are going to need to figure out what to do about more shows and movies. The reason we're all paying for Netflix is because there's always something new to watch. That'll be something they'll have to contend with.
Having said that, I think of all the streaming services, Netflix is probably the most protected from that issue, because they have the most content than anyone else.
David Furst: We're speaking with Jessica Toonkel, Wall Street Journal deputy media editor, and we're hearing from you, as well. Let's hear from Ruth, in Queens. Thank you for joining our discussion.
Ruth: Thank you for taking the call. I think you may have just addressed part of why I'm calling. My understanding has been that, of all of the different companies that the writers are having difficulty with, Netflix's at the very top of the companies that is not treating writers well. As a consequence of being brought up to respect picket lines, my family has decided that-- We just dropped all of our streaming services, but Netflix first.
David Furst: Well, thank you--
Jessica Toonkel: That's really interesting.
David Furst: A lot of-- I'm sorry, Jessica, go ahead. We only have a few seconds left.
Jessica Toonkel: No, I'd just be interested to see here if there are other people who are canceling streaming because of the writer's strike.
David Furst: We're going to have to leave it there, so much more to talk about, but-- Wall Street Journal deputy Media editor, Jessica Toonkle, thank you so much for joining us today.
Jessica Toonkel: Thanks for having me.
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