Monday, July 13, 2015

Netflix Credential Sharing is Marketing, Not Piracy

When is "piracy" actually a form of "sampling" and therefore a customer acquisition tool? When it is done by Netflix.

About half of U.S. households buying Internet access also buy an over the top video service, according to Parks Associates.

Parks also defines as video piracy the use of shared credentials by people other than account holders. Whether Netflix considers such sharing “piracy” is questionable, since Netflix seems to encourage the practice.

You might wonder why a subscription service would encourage people to give other non-subscribers access. Creating a new habit is one reason. Encouraging sampling is another reason.

Consider the firm’s finding that 20 percent of OTT users 18 to 24 use an OTT video service paid by someone outside the home,.

Only 10 percent of OTT subscribers 25 to 34 admit to this behavior. That’s the key behavioral insight. Netflix gambles that non-paying users will become paying subscribers once they reach their mid-20s.

In that sense, the credential sharing creates permanent behaviors that rather quickly become buying habits.

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