Price hikes and paid sharing: The cost of Netflix

Netflix customers can set their own user-defined household. However, if the customer fails to do that, Netflix will automatically determine a customer’s Household by IP address, device IDs and account activity. (Courtesy of Tumisu from Pixabay)

After increasing the price of ad-free streaming plans by 25% earlier this year, Netflix customers anticipate another price hike at the same time as the company cuts password sharing. Streaming customers’ favorite shows may soon cost more to watch.

Customers will have to weigh the cost of streaming ad-free Netflix against the significantly lower cost of watching Netflix with ads. Netflix anticipates some customers will close their accounts but reassures stockholders’ overall gain will be realized in ad-supported subscriptions.

Nathan Dille, a parent of two BYU students, is among other customers who have paid extra for ad-free streaming.

“I’ve expected everything to go up in the cost including this, so it doesn’t bother me,” Dille said. “Once it does, I’ll just cancel.”

Netflix ad-free plan prices are going up, but customers can still sign up for a Standard plan with ads at a significantly lower cost. The company hopes to improve their overall returns by attracting customers to a plan which is more budget-friendly while providing marketable revenue from advertisers. Shared access slots are not available on this plan.

Customers are also adjusting to Netflix’s restriction of unpaid password sharing. The company began implementing the regulation last Spring. The January 2023 Netflix shareholder letter attributed lost profits as the reason for the move: “Today’s widespread account sharing (100M+ households) undermines our long term ability to invest in and improve Netflix, as well as build our business.”

Last spring, Netflix began automatically setting the Netflix-defined Household for customers who had not specified it in their accounts. Contrary to how customers often define a household as family or close friends of the account holder, Netflix has clarified a household is based on a customer’s IP address, device IDs and account activity. The company does not collect GPS data to determine location of devices.

The crackdown on password sharing has affected families with children living away from home, friend groups who have pulled their funds together to share an account and those who are simply away from their Netflix-defined household.

“It makes it harder to use Netflix while traveling,” Brielle Liljenquist, a social science student at BYU, said. She recently returned from a trip to Cancun where she was unable to use her account because she was not near her Netflix Household IP address. 

Liljenquist questioned whether this locational streaming restriction is a good move for Netflix.

“A lot of people like to stream shows while they are traveling,” she said.

Customers are weighing out the cost of ad-free streaming against the significantly lower cost of watching Netflix with ads. (Courtesy of Mohamed Hassan from Pixabay)

A limited number of shared access slots are still allowed under the Standard and Premium ad-free plans for an added fee of $7.99 per month per person. That fee is paid by the base account holder. 

If customers want to share their password without paying extra, there is still a way, but it is tricky. When account holders do not stream on a TV, no Household IP address is needed.

Netflix told shareholders it expects to lose some business while customers get used to the changes: “As some borrowers stop watching either because they don’t convert to extra members or full paying accounts — near term engagement … could be negatively impacted.”

Netflix forecasts that profits will rebound over time as new and previously sharing customers will open their own accounts due to the quality of programs Netflix offers.

This is true for Lily Day, an anthropology student at UVU.

“We have a family deal that my dad will foot the bill until I finish school,” Day said.

Day explained she plans to pay the price for her own account after she graduates. 

While consumers may be grumbling, the popular streaming service saw a bump in stock values after it closed the door on unpaid non-household watching.

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