Netflix has been tightening its controls on password-sharing, a shift that could reap billions in previously lost revenue, but the company acknowledges it is a delicate process.
“We test many things but we would never roll something out that feels like turning the screws” on consumers, Co-CEO Reed Hastings said during the company’s first-quarter earnings interview. “It’s got to feel like it makes sense to consumers, that they understand it.”
The tests, which were revealed earlier this year, aim to “harmonize with the way consumers think about it,” Hastings added.
Netflix missed its own forecast for subscriber growth by a wide margin, reporting 208 million global subscribers at the end of the quarter. Wall Street analysts and investors have increasingly wondered how much the company could net by requiring every viewer to be properly logged into their own account. Citibank analyst Jason Bazinet recently estimated the company loses $6 billion a year by not limiting the practice.
Greg Peters, COO and chief product officer of Netflix, said the company “for a while” has been scrutinizing sharing, which he described it as a way of “continuously improving the service.”
Netflix is looking to land on a set of subscription packages and prices that offer value and accessibility across a wide gamut of socioeconomic circumstances around the world. “While we’re doing that,” he continued, the goal is to be sure “we’re good at making sure that the people who are using a Netflix account — who are accessing it — are the ones who are authorized to do so.”
Nidhi Gupta of Fidelity Management & Research, who moderated the earnings interview, asked Peters which regions of the world see the most rampant password sharing.
“We see different ranges of behavior,” Peters said, declining to get more specific. “How people orient themselves to the service is different country to country.” He added that to some customers, sharing their password is not nefarious and may in fact be a sign of loyalty and affection. “It’s more than just how they think about maybe how they think they’re working the system,” he said, “it’s how they think about sharing the service with a family member or someone they love.”
The patterns of how that sharing unfolds are “all different around the planet, and it’s different within countries,” Peters added.
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