Gen Z, Millennials more likely to cancel Netflix because of password sharing crackdown

The industry is watching as Netflix implements paid sharing that means users can no longer share streaming accounts among different households without paying a fee, and new data from Samba TV suggests younger viewers are more likely to cancel the SVOD in the face of a password sharing crackdown.

The survey and data analysis by Samba and HarrisX found 52% of Gen Z and 51% of Millennials would cancel their Netflix account if they could no longer share passwords with people outside of the home. That’s roughly double that of Gen X and Baby Boomers, with around a quarter of those age groups saying they would drop the service. Overall, Samba’s data found 37% of current Netflix subscribers would cancel in the face of a password sharing crackdown.

Netflix last week unveiled a price tag and started notifying subscribers about its paid sharing rollout in the U.S. Adding an extra member (aka someone outside the account owner’s household) costs around $8 per month  - $1 more than the ad-supported tier and a little cheaper than the $10 per month standard plan without ads.

On the plus side, Samba TV found that among those who currently use someone else’s Netflix account 64% said they would subscribe to the SVOD if they couldn’t use another person’s password, including 76% of Millennials that said the same.  Of the current password pirates that would subscribe, 39% said they’d take the $7 per month ad-supported tier and 25% would subscribe to an ad-free tier.

Analysts at Wolfe Research have pointed out how the relatively high price and policies for paid sharing are designed to drive sign-ups to the nascent ad-supported tier (which generates both subscription and ad revenue for the streaming giant), including rules like extra members only being allowed to stream on one device at a time. Analysts at Macquarie Research, meanwhile, previously modeled three scenarios where Netflix’s paid sharing strategy and a charge of $7.99 per month could catalyze ad tier growth. The firm modeled it could generate an estimated $1.17 billion to up to $3.5 billion in annual incremental revenue for Netflix in 2024 from both the add-on charge and ad-tier revenue.

Similarly, Samba TV CEO Ashwin Navin, highlighted that the streamer is nudging subscribers to its ad-supported tier.

“Data from Samba TV and HarrisX shows the crackdown on password sharing has the potential to hasten the growth of Netflix’s ad-supported tier as sharers are gently forced to migrate to their own accounts,” Navin said in a statement.” Of those who currently use someone else’s Netflix account, almost 40% say they’d move toward the cheaper monthly subscription with ads, while only a quarter may sign up for their own ad-free experience.”

Netflix is cracking down on account sharing as a way to monetize unpaid viewers as it looks for growth, previously estimating around 100 million users globally were watching the service without paying because of password sharing. And Samba’s data showed password sharing in general is on the rise, with a slight majority (51%) sharing their streaming subscription with someone else. According to Samba, nearly half (49%) of Netflix subscribers share their account another person, while 48% of Disney+ subscribers do the same. Of those that subscribe to at least one platform, 60% of those that have a streaming subscription share it with someone, including 79% of Gen Z and 74% of Millennials.

And Netflix is shared the most, as seven in 10 adults who share or borrow access to streaming services named Netflix as the one they’re most likely to share with others. The analysis also found that four in 10 people would be willing to pay more to share their account with someone outside of their home.

“Most [Netflix] subscriber losses due to password sharing are likely to come from younger generations. Our research indicates more than half of Gen Z and Millennial subscribers are likely to cancel their accounts if they are no longer allowed to share passwords,” stated Samba TV’s Navin. “This is roughly double the percentage of Gen X and Boomer subscribers who say they’d do the same.”

When it comes to the younger generation, TVREV co-founder and analyst Alan Wolk in a recent column on Fierce Video, pointed out there’s a cohort that could feel stung by the Netflix policies – specifically, college-aged or adult children that share parents’ account while not at home – and particularly those that started using the family account before they became adult.

He noted a precedent, where adult children stay on parents’ accounts for mobile, auto and health insurance.

“Which means the $64,000 question is whether people are going to see the crackdown as Netflix rightfully calling out scammers or Netflix being unnecessarily punitive? The answer seems to be ‘it depends.’,” wrote Wolk.

The analyst thinks friends and old roommates who share aren’t likely to push back against Netflix’s paid sharing, nor are middle-aged children who are keeping accounts for their parents because it’s easier on the tech side.

“It’s that middle ground—parents of college students and recent graduates who may or may not return to the nest sometime soon—who are the issue and it’s unclear what percentage of password sharing they represent, whether they regard what they are doing as ‘password sharing’, and, given that, how likely they are to actually add on a new account or just keep at it until Netflix kicks them off,” wrote Wolk.

He went on to assert that Netflix’s (still unclear) enforcement mechanism, and whatever positive or negative buzz it creates, will be key to how the password sharing crackdown is viewed by consumers “and it will also have a significant impact on the overall perception of Netflix.”