🤑 Netflix Is Coming After Our Wallets

This is The Level Ups. Modern business news for the future business leader (in plain-Jane English).

Netflix is making some money moves:

• Sharing accounts won’t be free anymore.

• Ads are coming.

• They're desperate, here's why.

• Netflix Gaming might be next.

Let’s get into it.

Estimated reading time:

Sharing Accounts Won’t Be Free (Is This The End?)

The era of free password sharing is over. 

Take it away, and people will pay for their accounts, right? I doubt it.

Netflix is marking the beginning of the end. But maybe I’m wrong.

Growing up, I didn’t know anyone paid for Netflix. Now, they think the content is good enough to turn freeloaders into customers?!?

It's a tough sell. I don't know about it.

How will it work?

Netflix hasn’t specified. Just that it’s “by making subscribers pay an additional fee for sharing their account with users outside their household.”

Your account will (probably) be tied to your IP address or Wi-Fi.

Most people might just drop Netflix for a competitor (there are so many now).

But Netflix isn’t stupid.

They’ll likely allow 2 more people to your account for $2.99 each (per month). This is what they did when they tested all this in Costa Rica, Chile, and Peru). That doesn’t mean it’ll be $2.99 when it rolls out in “early 2023."

This will launch along with a “profile transfer” feature expected to be popular among this group of customers.

With Stranger Things and Dahmer being such great hits, it makes sense. Time will tell.

A Cheaper Plan (But with Ads):

To be clear: we’re looking at a few minutes of ads at the beginning and end of shows. It’s not quite like Youtube (yet).

But the play makes sense. Netflix has 223M users (wow). It’s also a lot of eyeballs. Companies will pay big bucks to run advertising to an audience that big.

Netflix will now get paid by the $6.99 subscription and the companies buying ads. Plus, people might pay if the entry-level price is less. They’re the first big streamer to lean into ads like this.

There’s just one risk.

What happens if people paying $19.99 move down to the $5.99 plan?

A complete disaster, that’s what. Can’t wait to see what happens.

So Netflix risks losing customers, and customers risk trash advertising.

Who are the winners here?

Marketing people who are about to collect billions of impressions.

Signs of Desperation

In a few consecutive moves, Netflix is starting to look very desperate.

We’ve all known for nearly a decade that sharing accounts was normal. We also hate seeing ads all over our content (thanks, Youtube).

Netflix is doing both at around the same time. It’s a tough sell.

Not because Netflix is a “bad deal” per-se. Just not much of a value-add here. It’s hard to accept paying more for something when you get nothing more for it. No matter what it is.

But I can understand why based on the numbers.

Netflix had a tough summer (to say the least). They lost about a million subscribers at the time.

Remember, a company like Netflix thrives off its subscribers.

Was All This Pre-Mature?

Did Netflix overreact because of the rough summer?

Co-CEO Reed Hastings might’ve blundered during the last earnings call when he said: “Well, thank God we’re done with shrinking quarters.”

The statement’s just begging to age badly.

The good news is they’re not losing subscribers anymore. 

Still not as good as the same time last year. They added 2.4M subs this year. Last year at the same time, they added 4.4M.

Remember, Netflix stock is down ~54% this year. They’ve gotta do something to increase shareholder confidence (like make risky statements).

Not pre-mature. Netflix should be very worried. They want people to believe they’re over-correcting, and that it's not as bad as they once thought.

Is Gaming Their Saviour?

This is the second time a “legacy” internet company turned to games as their turnaround.

I covered POF yesterday with their in-app game, “Cue’d Up.”

Now, Netflix is opening a new gaming studio in Southern California.

It’s much too soon to know how it will go. But one thing’s for sure: Netflix aims to get younger users to fall in love with it as my generation did.

The real issue is they can't create content fast enough. When a new show comes out, people are done it a week later. Then what?

Instead of trying to take $2.99 for sharing an account, they should make content faster, honestly. That's how they'll win in the long term.

Let’s see what happens.

Thanks for reading.

See you tomorrow,

Darwin