Netflix password sharing puts college students on edge

As Netflix gets closer to rolling out password-sharing policies in the US, students who use accounts linked to family or friends are bracing for changes in their streaming habits.

The company has said to expect new password guidelines in the coming months, although it has not provided details on what they will look like. Netflix in February outlined password-sharing protocols for users in Canada, New Zealand, Portugal and Spain that require users to set a “primary location” for their Netflix accounts — and that add extra monthly fees for “non-household subaccounts.” .”

While Netflix has not said whether the U.S. plan will ultimately resemble those earlier changes, some worry that cracking down on password sharing could shake up streaming for students who have just left home, as well as burden lower-income students and their families. .

Sam Figiel, a sophomore at Mercer University in Georgia, said access to Netflix is ​​necessary for many of his peers’ classes. Figiel, who uses his mother’s account, said almost everyone he knows at school watches Netflix, though he and some friends may move away from the platform if password sharing ends.

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

Netflix has long touted how it puts subscribers first. Still, the gradual changes to password sharing have created uncertainty for students who may not have, or want to use, disposable income for their own subscriptions.

Netflix spokeswoman Kumiko Hidaka referred CNBC to the company’s previous announcements for information on earlier steps, but declined to comment further. Chengyi Long, the company’s director of product innovation, said in February that more than 100 million households shared accounts, which equates to about 43% of the company’s 231 million paid global memberships as of this month.

According to a 2022 Parks Associates survey, 40% of US households share or use shared passwords, up from 27% in 2019. People aged 18 to 34, who make up 30% of all Netflix users, are more likely to change password than older viewers. Netflix reported 74.3 million paid streaming subscribers across the US and Canada in the fourth quarter.

Vrisha Sookraj, a junior at the University of Maryland who watches Netflix from her parents’ account, said it’s the best streaming platform for almost everyone she knows. But she worries that potential policies could push some younger consumers away.

Sookraj suggested that a student plan, similar to cheaper subscription plans offered by Spotify, Hulu and Amazon Prime, could provide more flexibility while accommodating different income levels. Nevertheless, she is on the fence about whether she would pay the monthly fee herself.

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

Netflix executives have acknowledged that while the change should help the company’s financial results, it may not be as popular with users. Co-CEO Ted Sarandos said at a December conference that the paid-sharing model “feels a lot like the way you would manage a price increase,” adding that it will be “really revenue positive” and “market expanding.”

But he added: “Make no mistake, I don’t think consumers are going to love 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 main location for a monthly fee per additional user: CA$7.99 in Canada, NZ$7.99 in New Zealand, €3.99 in Portugal and €5.99 in Spain.

The company hasn’t shared what a U.S. pricing model would look like — if it follows that example.

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

The guidelines came after a trial period in Chile, Peru and Costa Rica that started in May.

The company has worked to support “customer choice and frankly a long history of customer centricity,” Netflix CEO Greg Peters, who became co-CEO in January, said on an earnings call last October.

Still, he said, the company must balance those goals with the need to “get paid.”

For Netflix, the calculation sets subscriber growth against monthly fees – and not for the first time. In November, Netflix launched a new tier called “Basic With Ads” that costs $6.99 per month – a bid to get more viewers at a lower price.

Some Wall Street analysts believe there could be a hiccup immediately following a US password breach, resulting in higher churn in the second quarter, followed by possible earnings growth.

Wells Fargo analysts believe password sharing could be a bigger short-term revenue catalyst than the introduction of the ad-supported tier.

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

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

If Netflix charges extra for subaccounts in the U.S., those extra costs could prove challenging for Thuan Tran, a senior at Duke University from Vietnam who shares her own account with her sister and partner. Although he acknowledged that many Duke students have the financial means to support additional costs, he said significant changes to the subscription structure would make him think twice.

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

Although the cost of a subscription may rise for borrowers, some students believe that Netflix is ​​too important to give up.

Elizabeth Danaher, a sophomore at the University of Missouri-Columbia studying communications and film, said Netflix has enabled her to watch movies with her family in Illinois while away at school, especially with her father, who edited “A League of Their Own” and “Home Alone 2.” She said it would “definitely hurt” if the cost structure prohibits her from accessing Netflix — which she considers an important “source of information” — even though she says she and many of her peers are likely to shell out 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, roughly 66% of households nationwide have Netflix. About 14% of all households that have Netflix borrow it from someone else and don’t pay, according to the online survey of 3,500 adults across the U.S., which jumps to 21% for consumers ages 18 to 34.

“What sharing did was help them grow the company, but now what it’s doing is limiting their potential subscriber growth,” said president and principal analyst Bruce Leichtman, adding that Netflix lost nearly a million subscribers last year in the U.S. and Canada.

Leichtman estimates that subaccounts could cost an extra $3 each, and says, according to survey data, about half of both sharers and borrowers say they would pay a fee at that price. About 10% in both categories said they would pay the surcharge but would also look to downgrade their account.

Of those survey respondents who share their login information, about a quarter say they would ditch Netflix after a policy change that would cost them extra monthly fees per subaccount, compared with a third of borrowers. Although Leichtman said it’s unlikely to play out to that extent as people settle into paying a few extra dollars per month under new guidelines.

Aravind Kalathil, a senior 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 prepared to have access cut off without warning if 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’ll make it work, but it just adds more trouble and irritation to something that is ultimately kind of consumed by the amount of streaming services out there,” Kalathil said.