Netflix’s crackdown on password sharing was good for the bottom line, but bad for the brand

Netflix hoped that cracking down on password sharing would convert sharers into subscribers, but it may have been equally successful at converting people into haters.

According to a new report from research firm MoffettNathanson, the streamer’s decision to restrict access to shared accounts has hurt Netflix’s perception among its users.

Using survey data of more than 19,000 adult Americans, MoffettNathanson found a majority of people who share accounts now have a negative view of Netflix. The vibes are particularly bad with young users. About 7 in 10 “givers” and nearly four in five “receivers” under the age of 35 say they have a negative perception of Netflix. Even a plurality of young non-sharers—49%—say they view Netflix negatively.

Also not helping Netflix’s perception is the fact that most people appear to be sharing passwords with members of their own family. According to the report, the most common sharing relationships are parent-child (42%), siblings (24%), and other family (17%).

The most surprising part of Netflix’s perception hit is that most users have yet to be affected by the crackdown. At the time the third-quarter survey was conducted, just 23% of sharing users said they had received a warning from Netflix about potential terms-of-service violations (though 72% of those warned have since lost access to their accounts).

For Netflix, the key is to turn those users into paid subscribers. About one in five users sharing an account say they plan to or already have signed up for their own. That jumps to 32% among those who have lost access to the platform. MoffettNathanson found that if 25% of sharers become ad-tier-level customers, the company would add 6.8 million subscribers and $567 million in annual revenue.

Netflix saw its subscriber rate skyrocket immediately after the crackdown, so the short-term strategy is working. But long term, the company will have to figure out a way to flip its perception. More Love Island, maybe?

Netflix is expected to report third-quarter earnings on Wednesday.

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