Disney+ to crack down on password sharing

In case you missed it, Netflix's password-sharing restrictions are now firmly in place - much to the chagrin of anyone still using their ex's logins.

Account holders globally are now prompted at sign-in to add profiles for viewers accessing the account outside of their household at an additional cost.

During the trial crackdown in May, many commentators predicted that Netflix would suffer a user exodus under the change.

The consensus was that similar streaming platforms offer less limited user access, more affordable services, or additional perks such as live sports, meaning Netflix was creating an opportunity for its competitors to grab a greater audience share.

In the last quarter of FY23, Netflix's results told a different story.

Netflix subscribers jump

While revenue year-over-year showed only a marginal improvement, platform subscribers jumped up by 5.89 million, smashing estimates and offering a radical contrast to the 970,000 loss of users in the same period last year.

It seemed that, rather than pushing people away, many found themselves locked out of a 'borrowed' account, let out a resigned sigh, and signed themselves up.

Of course, the password crackdown is just one piece of the puzzle. Out of all the big players in the streaming arena, Netflix is arguably the most willing to experiment. Its new, cheaper tier that serves content interspersed with advertisements has also given the platform a boost.

In May, the platform claimed five million users had jumped onto the economical option, contributing to the significant end-of-quarter user figures.

Other streaming platforms to follow suit

Other streaming services have traditionally watched Netflix closely as a market leader before implementing potentially divisive strategies themselves and this tradition hasn't abated. In August, Disney CEO Bob Iger confirmed that the company is "actively exploring ways to address account sharing" on the Disney+ platform, aiming for a 2024 rollout.

According to new figures released by Telsyte, almost 200,000 Australian users have unsubscribed from Netflix over the last 12 months.

A drop in the ocean compared to the service's steady increase in subscriber number globally - but with the report revealing one in three Australians share their streaming subs with friends and family, these ripples could indicate much bigger waves on the horizon.

The global rollout of the password-sharing crackdown has only concluded in the late phase of Q2, so all eyes will be on Q3 results across both revenue and subscriber counts as the true indicator of the policy's success.

Should Netflix announce decent growth across both those metrics, you can expect to see other providers such as Stan, Binge and Prime follow suit.

SAG-AFTRA strike

These services don't exist in a vacuum, however, and the still-raging SAG-AFTRA strike in Hollywood is anathema to an entertainment service already trying to convince people to pay more for less. If Netflix can't compel viewers in the next six months with a breakout hit like they have in the past, the same old troubles may arise.

With actors and writers alike marching on the curb, a second season of Wednesday or a follow-up to Monster: The Jeffrey Dahmer Story may not come soon enough. Execs are no doubt aware it's a race against time, having recently listed an artificial intelligence (AI) product manager role with a potential salary of up to US$900,000.

Whether a series written by a program will keep subscribers' bums affixed to the couch is another question altogether, but the Telsyte research indicates half the Australian population doesn't believe that generative AI can create captivating content, with 60% saying they want more locally produced content.

Netflix ANZ may see both a local warning and a global opportunity in that insight, so long as they're willing to fund more Australian creatives.

So will you soon find yourself forced to cough up to continue watching the shows you love across the spectrum of streaming options?

All signs right now are pointing to yes, but Netflix will have to clear the next quarter with flying colours before competitors see a password-sharing crackdown as a safe route to new sign-ups. With Hollywood effectively at a standstill, this challenge is more difficult than usual.

For investors, the potential opportunity is clear - if one more platform jumps on board, the rest will likely leap too - but with the cost of living sitting high and consumers already stretched thin in the home entertainment market, the risks are significant.

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