The extra fee Canadians pay Netflix for the privilege of sharing their passwords with others across multiple locations was supposed to roll out for U.S. customers months ago. However, despite saying the extra charges were “positive” in Canada, the streaming giant is delaying charging Americans the same price they charge Canadians by several months.
Those results include Netflix reporting that “revenue growth has accelerated” in Canada and that it has more customers in this country than before it started charging extra for password sharing.
So despite Netflix seeing financial gains in Canada from charging more for password sharing, and telling its investors it believes the Canadian market is a “reliable predictor” of the U.S. market, it has still opted to delay charging American consumers more by months.
People [in Canada] moved past it. Whereas in the States, they would be expecting a far more vitriolic reaction.– Vincent Georgie, University of Windsor
Experts such as John Buffone, vice president and media industry analyst at market research firm Circana, told CBC News that Netflix could be reticent to make changes to such a large part of its business.
“If you were the company testing something that you know is not necessarily going to be met with a whole bunch of smiley faces from viewers? You’re not going to do that in your largest market, the United States,” said Buffone, speaking from Oceanside, New York.
What’s good for Netflix could anger Americans
According to Buffone, Netflix as a company would greatly benefit from what amounts to a price increase for many customers.
“if they successfully transition over to what they’re calling a paid password sharing model, this is the greatest potential revenue gain for the company,” he said.
According to Netflix, more Canadian subscribers ended up with the company several months after the increased charges.
It’s now planning to start charging Americans the same fee sometime before July, after an original plan to begin the U.S. charge by March.
But Buffone pointed out American consumers may not react as Canadian consumers did.
“A misstep here could send stock prices tumbling,” he explained, comparing any rapid change made today to when Netflix — unpopularly — tried to split its then DVD-by-mail business into a separate service from its internet-based service in 2011.
At the time, subscribers complained and the company’s stock fell by more than half.
Canadian market ‘matters less,’ says movie business expert
At least one film industry watcher in Canada said it’s not a surprise Netflix is willing to experiment with charging Canadians more, while remaining fearful of American reaction.
“I mean, we’re less than 10 per cent of the U.S. market so they can take some carelessness with our own Canadian market because it matters less,” said Vincent Georgie, assistant professor of marketing with the Odette School of Business at the University of Windsor.
According to Georgie, who is also executive director of the Windsor International Film Festival, Netflix is part of an entire film industry and ecosystem that is risk averse. Testing Canadians on higher charges is a good way to see what happens before testing on a larger market.
“In Canada, I mean, it’s been a somewhat of a muted reaction … but you know, people moved past it. Whereas in the States, they would be expecting a far more vitriolic reaction, something that could actually shock the market,” said Georgie.
Netflix competitors could follow suit
For Canadian customers such as Dan Student, the additional charges resulted in him cancelling his service.
His family includes five kids, who are regularly cared for at their grandparents’ home in addition to Student’s home, and the family Netflix account was used in both places for the sake of childcare continuity.
“I put it at my dad’s house, signed into it, and that’s what the kids watched there,” said Student, who lives in Grande Prairie, Alta.
The fact that his Netflix account started to cost an extra eight dollars per month, compared to a customer who lives in, for example, Grand Prairie, Texas, rubbed Student the wrong way.
“We did beat around the bush for a while, but I cancelled it,” he said, pointing out that his family is now turning to Amazon Prime and Crave as alternatives.
However, those savings may be short-lived. Vincent Georgie said he expects Netflix competitors in both the United States and Canada to introduce similar additional charges in the future.
“They’re sort of curious how it’s going to go,” said Georgie.
“They want Netflix to take the brunt of this and the brunt of the consumer heat around it. “