Netflix, one of the leading video streaming services, has recently announced its plans to crack down on account sharing in select markets, including India, Indonesia, Croatia, and Kenya. The new policy will come into effect from July 20, 2023, as the company aims to enhance its revenue growth in the latter part of the year.
Different Approaches in India and Other Markets To tackle the account sharing issue, Netflix is taking a different approach in India and other countries where paid sharing has not been implemented. Instead of offering an ‘extra member’ option, the company has decided not to introduce this feature in these markets. The decision is influenced by recent price cuts in these regions and relatively lower penetration of paid sharing. Netflix aims to maintain simplicity and ease of use for its users in these markets.
In an official announcement, Netflix stated, “A Netflix account is for use by one household. Everyone living in that household can use Netflix wherever they are – at home, on the go, on holiday – and take advantage of new features like Transfer Profile and Manage Access and Devices.”
“We recognize that our members have many entertainment choices. It is why we continue to invest heavily in a wide variety of new films and TV shows – so whatever your taste, mood, or language and whoever you are watching with, there is always something satisfying to watch on Netflix.”
Transition for Borrowed Accounts For members who have been using borrowed accounts, Netflix will allow them to transfer their existing profiles to new or existing accounts. The company has begun sending emails to members sharing accounts outside their households in India, starting from the implementation date.
Positive Outcomes from Account Sharing Measures Netflix’s efforts to curb password sharing have shown promising results in most of its markets. In May, the streaming service expanded paid sharing to over 100 countries, covering more than 80 percent of its revenue.
Strong Growth in Paid Memberships During the second quarter of 2023, Netflix experienced robust growth in paid memberships, adding 5.9 million new subscribers. This marked a significant increase compared to the same period last year when the company reported a loss of nearly one million members. The overall subscriber base reached an impressive 238.4 million subscribers for the quarter.
Anticipating Revenue Impact in Q4 2023 Although the revenue impact from the account-sharing initiative was relatively modest during Q2 2023, Netflix remains optimistic about its potential. The company expects to realize the full benefits of paid sharing in the later part of the year, particularly during Q4 2023, as it continues to focus on monetization.
Paid Sharing Rollout Netflix’s Chief Financial Officer emphasized that the primary revenue accelerator for the company this year would come from a rise in volume through new paid memberships, primarily driven by the paid sharing rollout. Netflix anticipates this impact to gradually build over multiple quarters.
Confidence in Advertising Business Despite the doubling of ad-tier subscribers since Q1, ad revenue is not currently a significant component of Netflix’s earnings. However, the company expressed confidence that advertising can evolve into a multi-billion-dollar incremental revenue stream over time.
As Netflix takes strong measures to curb account sharing in key markets, the company’s strategic focus on expanding paid memberships and monetization underscores its commitment to enhancing revenue growth and solidifying its position in the fiercely competitive video streaming industry.