DESIIGNER | Not All Netflix Views Are Equal

A week ago, my roommate asked me if he could use my Netflix account. At the time, I didn’t think much of it. He was a friend and I had an account, so of course I said yes. A few days later, it hit me that I was subscribed to a product that could be shared amongst as many people as possible—that not all Netflix users are viewed and accounted for equally.

After some research, I learned that amongst the deep sea of products and services that charge a routine fee for membership, Netflix actually stands closer to businesses that try to incentivize paying a bit extra for more shared users (e.g. Spotify) than ones that aim to eliminate all loopholes for sharing (e.g. a Cornell gym membership).

However, subscription business models similar to Netflix’s (e.g. WSJ) all face a similar challenge:

Unless they have a way to identify the actual person attempting to use the product, their only point of leverage is not allowing multiple (or more than the subscribed amount of) users to use their product or service at the same time.

So even if it causes inconveniences, does this imposed restriction actually deter users from sharing one membership? And if it does, do these users go purchase their own or simply give up and cause Netflix to lose views & usage? Depending on the effectiveness of this strategy, the usage rate of individual accounts could wildly vary. Many individual accounts might be shared by multiple people, and Netflix could be left scratching their heads as to why their usage rate & views on shows don’t directly turn into gross profit while revenue gets overtaken by the skyrocketing costs required to acquire new titles and maintain high quality streams that ensure a good product.

What can Netflix do about this problem? Are they doing anything about it now?

In an attempt to learn more about the behaviours of users, I created a miniature case study, interviewing a pair of Cornell students who played different roles in sharing a Netflix subscription. In the following, X is the person who pays for the subscription while Y uses it for free.

Welcome to the series:

Understanding Surroundings Through Design Thinking

***

“How often do you—and the people you share with—use Netflix? What are your schedules like, and do they ever collide and cause inconveniences?”

User X (pays for subscription)

I use Netflix for about 1-2 hours everyday. I’m not sure about the others’ schedules but I purchased the plan that allows for the most screens shared in order to avoid the inconvenience of overlapping usage.

User Y (uses friend’s subscription)

I use it three-four times a week, depending on how much free time I have. Not sure how often my friend uses it but we never collide. His account is actually a family one, where there can be multiple people on it.

***

“As the person who purchased this membership, how do you feel about sharing it with others? Have you ever thought about asking the ones you share your account with to pay for some or even consider expanding the number of screens shared?”

User X (pays for subscription)

At first, I thought about charging multiple people at a very discounted, monthly rate, which could result in a few dollars of profit for myself every month. However, I didn’t end up following through on that because I figured it would have been more of a hassle than anything. In the end, I chose to pay a few extra bucks for more shared screens since I was going to be paying a normal plan for myself anyways.

***

“How do you feel about using a shared Netflix subscription? Are there any drawbacks that might make you want to consider purchasing your own?”

User Y (uses friend’s subscription)

I did pay my friend a “one time 50 bucks fee” for using his account. But it was more of an “I feel bad using it for free” kind of thing. I think he also shares it with 2 or 3 more guys.

***

“If you have ever purchased or thought about purchasing your own subscription, what were the reasons for cancelling or never purchasing a subscription?”

User Y (uses friend’s subscription)

I haven’t considered getting my own subscription because I feel like I personally don’t use it often enough and sharing an account seems to make much more financial sense.

***

“How long has this sharing process been going on? Do you think it will continue and why?”

User X (pays for subscription)

It’s been going on for around 4 years and I’m pretty sure it will continue unless any inconveniences start to surface & become more common, or if Netflix starts to crack down on this practice in some way.

User Y (uses friend’s subscription)

For two years and it’ll continue since we never have conflicts watching it.

***

Insights

• User Y paid a one-time $50 dollar compensation fee to user X for using the subscription. Depending on how other shared users find ways to compensate the owner of the account, Netflix could be losing a sizable amount of revenue from this loophole.
• Here, Netflix’s strategy of only allowing “the amount of screens paid to be used in real time” does not seem to be a strong enough of a deterrent to prevent users from sharing and force them to purchase their own.
• User X has been using user Y’s account for 2 years. User Y has been sharing their account for around 4 years. The fact that their behaviours have not significantly shifted makes me questions where Netflix currently stands in terms of sales and long term strategy.
• Something that I did not bring up & wish I had was content. Could it be that part of Netflix’s challenge is the actual selection of shows & movies it provides? If their content was more engaging and in higher demand, could Netflix’s current subscription plan work to generate more profit? The reason I bring this up is because Netflix’s brand has not been focused on airing the latest & most popular (e.g. Game of Thrones) but rather adding a shows that have aired & proven to become popular over time.

***

As I speculate

How Netflix will maneuver in the near future, I’m curious as to whether or not the company, like user Y said, will choose to start “cracking down” on the practice of sharing accounts, change up the format & content of the product, or simply continue its policy of lax enforcement.

Although I know that this study does not represent—in any way, shape, or form—the entire population of Netflix users and that many of my quantitative findings are not scalable, I do think it was successful in providing certain insights and encouraging intellectual dialogue on user behavior with regards to digital subscription products & services.