Following Netflix’s successful implementation of a password-sharing crackdown, Disney has launched its own program to convert Disney+ password borrowers into paying subscribers. This week, Disney+ began notifying users in multiple regions, including the U.S., Canada, Europe, and the Asia-Pacific, that their paid-sharing options are now widely available. This move allows subscribers to pay for friends or family members outside their household who had previously used their account without authorization.
Disney+ explained that subscriptions are intended for use within the subscriber’s household, defined as devices associated with a primary residence. For those outside this household, a new Extra Member feature is available, costing $6.99/month for Disney+ Basic or $9.99/month for Disney+ Premium in the U.S. Notably, this option is not available to Disney Bundle subscribers or users billed through third-party partners.
This expanded rollout coincides with upcoming price hikes for Disney+ subscriptions, set to take effect on October 17. Disney+ Basic (ad-supported) will increase from $7.99 to $9.99 per month, and Disney+ Premium will rise from $13.99 to $15.99 per month. Additionally, similar restrictions are planned for Hulu and ESPN+ in the future.
Disney also reassured customers that access would still be available for those traveling. A one-time passcode is needed to log in outside the primary household location. The move aims to bring in additional revenue by converting password sharers into legitimate subscribers, following the model previously set by Netflix.
The Take
A Blueprint for Streaming Platforms – Netflix’s Approach
Disney’s password-sharing crackdown represents a strategic decision to increase its subscriber base and revenue in an increasingly competitive streaming landscape. The approach follows a similar initiative by Netflix, which led to significant subscriber gains. The question is whether other OTT platforms should adopt a similar model and, if so, how effective this strategy might be across the industry.
Netflix’s decision to curb password sharing met initial resistance, with many users threatening to cancel their subscriptions. Despite this backlash, the strategy ultimately paid off. In Q3 2023, Netflix reported an addition of 8.8 million subscribers, followed by an even higher gain of 13.1 million in Q4, pushing its total subscriber base to over 260 million. In Q2 2024, Netflix added 8 million more subscribers, marking a 37% year-over-year increase and continuing a six-quarter subscriber growth trend.
From a financial perspective, Netflix’s profit in Q2 2024 rose 44% year-over-year to $2.15 billion, surpassing analyst expectations. The company’s revenue climbed 17% to $9.56 billion. These figures demonstrate that, despite the initial backlash, enforcing password-sharing restrictions effectively boosted Netflix’s profitability and overall growth.
The introduction of an ad-supported tier at $7 per month and an option for users to add members for a reduced fee played a key role in Netflix’s success. By providing an affordable alternative, Netflix converted previous password borrowers into paying customers, expanding its revenue streams. Disney is now adopting a similar model, hoping to replicate this success by turning unauthorized viewers into legitimate subscribers.
The Ultimate Playbook for OTT Platforms
The success of Netflix’s password-sharing crackdown has provided a clear playbook for Disney and other OTT platforms to follow. The rationale is simple:
Converting Unauthorized Users: Millions of people have accessed streaming services without paying, resulting in significant potential revenue loss. By converting these unauthorized users into paying subscribers, platforms like Disney can strengthen their subscriber base and boost their profitability.
Affordable Transition Options: Netflix’s introduction of a lower-cost, ad-supported plan allowed users unwilling to pay full price to still engage with the platform. Disney is now using a similar strategy by offering Extra Member slots at a lower cost, making it easier for unauthorized users to transition into legitimate subscribers.
Revenue Growth and Engagement: Netflix’s decision to introduce an ad-supported tier has contributed to its subscriber growth and opened new revenue opportunities through advertisements. By adopting a similar approach, Disney and other OTT platforms can diversify their revenue models, reduce dependency on subscriptions alone, and increase overall user engagement.
Why Every OTT Platform Needs This Strategy in Their Playbook
The streaming market is increasingly competitive, and the days of exponential subscriber growth are behind most platforms. Here’s why other OTT services should consider following Netflix and Disney’s lead:
Combatting Revenue Loss: Password sharing represents a significant revenue leak for the industry. Implementing sharing restrictions can convert millions of unauthorized viewers into paying customers. Platforms like Warner Bros. Discovery’s Max have already indicated plans to roll out similar measures, recognizing the opportunity to boost revenue.
Ad-Based Revenue Expansion: The introduction of ad-supported plans makes subscriptions more affordable, allowing platforms to tap into price-sensitive audiences. As Netflix has demonstrated, these plans can drive subscriber growth and generate ad revenue. This model not only widens the customer base but also creates new streams of income.
Sustainable Growth Amidst Market Saturation: The streaming landscape is crowded, and attracting new subscribers is increasingly challenging. Implementing password-sharing restrictions helps platforms retain more control over their content, incentivizing unauthorized viewers to become paying subscribers. By offering flexible options—like ad-supported tiers or Extra Member slots—platforms can retain users at different price points, ensuring continued growth.
The Path Forward: A New Era in Subscription Management
Netflix, Disney, and potentially other platforms’ moves signal a shift toward a more controlled, revenue-focused approach to subscription management in the OTT industry. By converting unauthorized users into paying subscribers, these platforms can better monetize their content and ensure sustainable growth.
Warner Bros. Discovery is also planning to implement similar password-sharing restrictions for its Max platform, following Netflix’s success. By enforcing account-sharing limits and encouraging new sign-ups, Warner Bros. aims to capitalize on untapped revenue potential while maintaining a tighter grip on user access.
If implemented effectively, this strategy could lead to an industry-wide transformation, setting new subscription-sharing standards and pushing more platforms toward ad-supported models. As streaming giants like Disney, Netflix, and Warner Bros. Discovery continue to refine their offerings, the playbook established by Netflix’s success could guide other platforms aiming to strengthen their market position and profitability.
