With Netflix tanking a couple of weeks ago, it’s as good as a time as any to revisit personal consumer subscriptions. With inflation on the rise and consumers feeling the squeeze, I wonder what these consumer-subscription-based businesses are doing to retain consumers and continue to grow their revenues, especially as some of them approach market saturation. Understandably, it seems that many are starting to crack down on sharing accounts.

Businesses want to crack down on sharing

Consumer subscription service business can do one of three things to increase revenues: 1) sign more people up for the service, 2) charge more per person for the service, or 3) retain each person for longer. (Enterprise SAAS has a similar pattern – they can either 1) sign more businesses up for the service, 2) increase number of seats per business, 3) increase price per seat, or 4) increase retention).

With businesses approaching saturation, like Netflix, they can no longer sign more people up for the service…except if they get rid of shared accounts. Or, perhaps since they can assume several people share one account, they charge more per account. Of course, they need to always be working on increasing consumer value and increasing retention.

The New York Times, for example, gets very angry if you share accounts:

But I wonder if they would actually freeze or disable accounts. Can they risk alienating paying customers and losing a subscriber?

Consumer subscription strategies to convert sharers into sole account holders

Enforcing password sharing rules is difficult, which is why so many companies don’t pursue it. However, as Netflix’s Greg Peters put it on a recent earnings call, “…there is a group of viewers that are not paying us, and they’re sharing someone else’s account credential. And we really see that second group is a tremendous opportunity because they’re clearly well-qualified.” There’s a number of ways to compel users to pay.

The New York Time’s strategy is one consumer subscription businesses can adopt. Businesses can threaten and/or guilt people sharing accounts into…well, not sharing them. I’m skeptical that this works, especially since businesses rarely follow through on those threats. Shaming or angering customers is not such a great monetization strategy.

Stratechery has an interesting strategy, in that they created and adopted a tool to ensure that users cannot share passwords. Each time one logs in, a one-time password is sent to one’s email or phone number. This adds additional friction for people who share the account.

Netflix has said that to monetize sharing they will charge by number of geographic locations. By recording the number of IP addresses an account uses a month, Netflix can keep track of how much an account is “shared”.

Netflix also pioneered the strategy of creating distinct user profiles on one account. The idea is that users gain so much value from having a distinct profile on an account – keeping track of one’s “To Watch” lists and having good recommendations, for example – that they will pay for that extra value. As an extremely picky TV watcher, I have yet to be served a good recommendation from a TV and movie provider, however. I don’t think that profiles provide as much value as companies think they do, yet Amazon and Hulu have followed suit here.

Netflix additionally keeps track of the number of devices that can be using Netflix simultaneously. Hulu also tallies the number of simultaneous streams per account. This limits sharing, but rarely do people watch at the exact same time, especially if the account is shared across time zones. Spotify also uses this strategy, with more success: I believe people who pay for Spotify listen to music for more hours in a day than they watch television.

Disney adds one further mysterious threat as a potential strategy. Says Disney’s Michael Paull, “We have created some technology that’s in the backend that we will use to understand behavior. And when we see behavior that doesn’t make sense, we have mechanisms that we’ve put in place that will deal with it.” Perhaps they will cross-share user data with other services to mitigate piracy.

A user-centric way to get users to pay more per account or get them to pay for their own account

These businesses are approaching the problem from primarily a monetization perspective, but perhaps they should also revisit how much value they provide per person and how they can provide more value for a person owning an individual account.

Providing more value for a person owning an individual accounts

Users will pay a premium for individual accounts with consumer subscription products when they require increased personalization. I can see that users specifically value increased organization, sole control, and privacy quite highly.

• For example, if two brothers share an Apple iCloud account, one wouldn’t like having the other’s photos (and contacts, and whatever else) all jumbled together with theirs. Users want their photos to be organized, so they’ll pay for their own iCloud.
• Spotify, as I mentioned earlier, is difficult to share if one listens to music constantly. For Spotify, a user will require full use of the account, since otherwise their music will pause at the another person’s whim.
• Lastly, privacy is very important for accounts on Amazon Prime and GitHub. Users don’t want anyone to know when they order something embarrassing, or when they write extremely ugly or buggy code.

Streaming companies should take a look at where they can push users to purchase their own accounts by providing features that tap into these user needs. Don’t want your mom to know you’re watching 50 Shades of Gray? Get your own account. Don’t want your friend to mess with your ‘To Watch’ list? Get your own account. Don’t want your streaming or recording interrupted? Get your own account.

Use technology as a guardrail

Lastly, turn to technology as a guardrail. Put plans in terms of hours of TV watched per account, or strip-down your on-demand TV offerings and ask users to spend credits to choose to record other TV shows in advance. Offer micro-subscriptions for those who only want access to your horror movie archives. Force users to provide a one-time password from an email or phone number every time they log in. Technology restrictions are the most destructive to the consumer’s experience and are likely to cause churn, so this should be a company’s last choice.

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It is easy to pick on media companies like Netflix and Amazon, especially given the companies’ stock prices recent movements. However, all subscription-based consumer businesses should be in high-alert mode and looking to increase the value they provide for an individual subscription.