Netflix is bringing back piracy

The Netflix password-sharing crackdown has begun. It may not have been launched in the United States yet, but up here in Canada, subscribers had until February 21 to set a primary residence, after which they’d have to boot their friends and family or pay an extra C$7.99 a month for anyone outside their home. That’s on top of the C$16.49 or C$20.99 they’re already paying for their subscription.

We likely won’t get a good picture of how this is playing out until a future quarterly earnings report from the streaming giant. It’s entirely possible the company will see a net increase in revenue from people who can’t fathom giving up their access and will either pay the extra for another home or sign up for their own account when they’re kicked off the one they’ve long been using — and ultimately, that’s all that Netflix cares about in the short term. But it seems certain to have unintended consequences.

Given this is already happening in Canada, I’ve anecdotally heard from a number of people canceling their Netflix accounts or even talking about spinning up Plex servers as the bill for all these streaming services continues to escalate. That’s not to mention all the Canadians posting about canceling their accounts. Personally, I no longer have access to Netflix and don’t use it enough to justify paying for my own subscription. I tend to watch Crave (where a lot of HBO Max and Hulu content goes in Canada) and some Apple TV+.

In their bid to squeeze more revenue out of viewers, the streaming companies seem to be kicking off a new wave of digital piracy as the system they promised would be superior to the old cable model looks more like it with every passing year.

The False Promise of Streaming

When streaming services started launching in the latter half of the 2000s, one of the driving factors was appealing to “cord cutters” to ensure they weren’t just pirating the shows and movies they wanted to watch. Amazon Prime Video, Netflix, and Hulu all launched between 2006 and 2008, and the industry continued to grow through the 2010s. Since streaming was anointed with the hype of the tech industry, it became imperative for all entertainment companies to get in on the supposed gold rush by launching their own streaming platforms and spending big on content to attract subscribers. For years, all that really mattered to investors was subscriber growth, even if the companies were losing billions of dollars. The assumption was that they’d eventually make it back.

The sell to consumers was a big one: Not only would this new way of viewing be more convenient because you could just log onto your service and be greeted with a massive catalog of content — all without ads — but it would also be cheaper and of higher quality than what you could expect on cable. What was not to like? The only problem is the promise was never realistic, and now that aspects of it are slowly being revoked, consumers are rightfully angry. For example, as Ian Bogost recently pointed out in The Atlantic, password sharing was an explicit part of what Netflix was selling, even going so far as to tweet “Love is sharing a password” in 2017. Now they want us to believe we were stealing from them this whole time.

But that’s not the only way the sell is changing. The number of streaming services has exploded in recent years, meaning it’s not only become more expensive for viewers to access all the content they might want to watch, but it’s also become harder to figure out where to find it. Companies are increasingly pulling content from their libraries and trying to reduce future expectations. It started with companies removing shows from Netflix to put them on their own platforms, but more recently HBO Max has been gutting its catalog after its parent company Warner Brothers merged with Discovery, Netflix has become known for prematurely canceling shows, a number of companies are scrapping and canceling planned shows and movies, and services like Disney are planning to make less content moving forward.

On top of those changes to the viewing experience, streaming services are getting more expensive and adding advertising to squeeze more revenue from subscribers.

• Netflix increased prices by up to 10% in early 2022, then added an ad-supported tier in November, and is now beginning its password-sharing crackdown. The price is basically double what it was in the early 2010s.
• HBO Max is up 7%, from $14.99 to $15.99, or $9.99 for an ad-supported plan.
• Disney+ is up 37.5% to $10.99, or $7.99 with ads. It was $6.99 without ads in November 2019.
• Apple TV+ is up 40%, from $4.99 to $6.99.
• Hulu is up 15%, from $12.99 to $14.99, or $6.99 to $7.99 with ads.
• Amazon raised prices of its Prime membership by 17% in February 2022 from $119 to $139 annually (or $12.99 to $14.99 monthly).
• Peacock dropped its free tier, leaving options for a $4.99 ad-supporter tier or a $9.99 ad-free tier.
• Paramount+ plans a price increase later this year.

Those are just the most prominent services, and there’s surely more to come. It remains to be seen whether the other services will follow Netflix in cracking down on password sharing too. But the key takeaway here should be that the streaming system is becoming more expensive, less convenient, and less attractive to consumers who were sold salvation from the cable bundle. And clearly, that will force them to change their habits.

Piracy Is On the Rise

After a decade of hype, the rapid increase in interest rates has reset investor expectations. Without cheap money, they’re no longer content for companies to lose money to bring in new subscribers, especially as that growth has leveled off following the huge spike in the early part of the pandemic. There’s also a recognition that the business of streaming simply isn’t as good as what existed before — since content sits in a company’s streaming catalog, there’s far less opportunity to continue selling content rights and physical media for years into the future. That’s not only worrying investors, but workers in the industry are fed up with the status quo on streaming productions and are demanding a fairer deal.

Regular viewers are not going to subscribe to an infinite number of streaming services to watch television and movies. They might pay for two or three to get what they watch most often, but that’s it for most people. From there, they’ll either abstain or find other ways to watch everything else. To that end, research has found digital piracy is on the rise. It was up 16% in 2021, followed by another 39% jump in 2022 — and it’s hard to blame people.

Technology and entertainment companies sold us a better future where we’d get more and better content for a lower price that would be easier to access. For a while, it looked like they were delivering, but that fantasy now seems farther away with every quarterly earnings report. People will still watch what they want, and if companies make the barrier to doing so legally too high, they’ll find other ways as they always have.