Netflix has recently announced its plans to crack down on account sharing in select markets, including India, Indonesia, Croatia, and Kenya, starting from July 20, 2023. The move comes as the company seeks to enhance revenue growth in the latter part of the year.
Different Approaches in India and Other Markets
In an effort to address the account sharing issue, Netflix is adopting a distinct approach in India and other countries where paid sharing has not been rolled out. Instead of offering an 'extra member' option, the company has decided not to introduce this feature in these markets. The decision is based on recent price cuts in these regions and relatively lower penetration, as Netflix aims to maintain simplicity and ease of use for its users.
In an announcement on Thursday, Netflix said, "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 recognise 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
To accommodate members who are using borrowed accounts, Netflix will allow them to transfer their existing profiles to new or existing accounts. The company is expected to begin sending emails to members sharing accounts outside their households in India, commencing today.
Positive Outcomes from Account Sharing Measures
Netflix's efforts to curb password sharing appear to be yielding positive 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 witnessed robust growth in paid memberships, adding 5.9 million new subscribers. This marked a substantial 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
While the revenue impact from the account-sharing initiative was relatively modest during Q2 2023, Netflix remains optimistic. The company expects to realise the full benefits of paid sharing in the later part of the year, particularly during Q4 2023, as it continues to focus on monetisation.
Paid Sharing Rollout
Netflix's Chief Financial Officer emphasised 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 monetisation underscores its commitment to enhance revenue growth and solidify its position in the fiercely competitive video streaming industry.