Netflix’s Unnecessary Password Crackdown Is Already A Hot Mess

Netflix's password sharing crackdown hasn't even launched yet in the States, but is already a public relations mess.

The plan is to try to force Netflix customers to pay an extra $2-$3 every month for service for any users using your credentials outside of the home. An accidentally leaked Netflix help guide last week indicated that users who don't log into their Netflix account in a 31 day period would face the new surcharges, something that didn't go over well with either users or celebrities that travel a lot.

The company was then forced to backtrack, stating the guides were posted in error, and intended for customers in countries like Chile and Peru where the crackdown had already launched. Those efforts, as we'd mentioned previously, were also reportedly a confusing mess for subscribers in those countries, who say it was never really clear how the inconsistently-enforced system actually worked.

Netflix is embracing the move because the company's growth has hit a wall internationally, forcing it to begin nickel-and-diming existing subscribers if Wall Street is to get its improved quarterly returns.

The problem: Netflix has already raised rates recently, and already charges users more money if they want to be able to play multiple streams simultaneously, meaning they're effectively double dipping after more than a decade of informing customers that they fully supported password sharing.

Netflix is convinced that the move will net them millions in additional revenue, but as we've also previously noted, projected revenues from the crackdown don't appear well-rooted in reality. Some analysts have been highly skeptical that Netflix's password crackdown pays significant dividends at all:

Benchmark Co. analyst Matthew Harrigan, in a note last week, expressed skepticism that it would be a growth game-changer," opining that the strategy cannibalizes full-ride member growth." He pegged the incremental revenue lift at less than 4% revenue, even with generous assumptions about how many piggybackers Netflix might be able to convert to Extra Member accounts.

The question then is: is that modest bump in revenue worth alienating and annoying your existing customers in a competitive streaming market? We're apparently going to find out.

To be clear, I still think Netflix has value at its current monthly rate, and many people who complain about the new rate hikes are lazy and likely won't cancel. On the flip side, this move remains the latest signal from the company that it's done with being innovative and disruptive and has, as publicly traded companies usually do, shifted toward nickel-and-diming and turf protection as it attempts to fend off competitors.

But angering your customers, and making them more likely to shift to competitors that don't try and nickel-and-dime users, isn't a particularly brilliant business plan any way you slice it. And if the rollout is as sloppy as it was in Chile and Peru, this won't be the last screw up users experience.