Netflix Launches “Paid Sharing” Initiative to Crack Down on Password Sharing
After months of speculation and anticipation, Netflix is finally cracking down on password sharing. The streaming giant has launched a new initiative called “paid sharing” which will require users to pay an additional membership fee to add profiles for those living outside the household of the account owner. The policy has already been implemented in four countries, including Canada, New Zealand, Spain, and Portugal, and the rollout to other countries, including the US, is planned for the second quarter of this year. The move comes after Netflix claimed that more than 100 million households are sharing accounts, impacting its ability to invest in and improve its service for paying members.
Although the initial reaction to paid sharing has been negative, with Netflix citing a “cancel reaction” in each market where it has been implemented, the company says it has been “pleased with the results” so far. According to Netflix’s Q1 letter to shareholders, the company has learned from its tests and “found opportunities to improve the experience for members”. Increased revenue is expected as borrowers activate their own Netflix accounts, and existing members add “extra member” accounts.
Despite the positive outlook for increased revenue, Netflix’s Q1 results were a mixed bag, with the company adding only 1.75 million new paid subscribers, 20% below what analysts had expected. The company said subscriber growth in Q2 would be roughly similar to what it just reported, less than half the 4.1 million net new subscribers analysts had predicted for the period. However, Netflix’s revenue of $8.16 billion for the quarter was roughly in line with projections from the company and Wall Street, and the company boosted its free cash flow target for the year by 17%.
Netflix has estimated that over 100 million non-paying households have access to its service through free account sharing, and the company has been explicit in its guidelines that an account is intended to be shared within one household, which is defined as people who live in the same location as the account owner. Nonetheless, members of Netflix can continue to use the service even when they travel by utilizing their own personal devices or by signing in to new televisions, such as those found in hotels or vacation rentals.
The new paid sharing system will allow primary Netflix users to add up to two members outside of their household to their plan for a fee, which in the countries where it has been implemented so far has been CAD$7.99 per month per person in Canada, NZD$7.99 in New Zealand, 3.99 Euros in Portugal, and 5.99 Euros in Spain. The company has not yet confirmed whether IP addresses and device IDs will be used to identify devices as part of the same household and whether every month all “household” devices will have to connect to the primary user’s wi-fi to maintain access.
In addition to the new paid sharing policy, Netflix has also announced that it will end its DVD-by-mail business, which launched the company into consumers’ homes. Revenue from the DVD business has declined from $911 million in 2013 to $146 million in 2022.
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