Netflix has expanded its paid account-sharing initiative to more than 100 countries, encompassing over 80% of its revenue base. This comes after the company began cracking down on users who share their Netflix password in the U.S. on May 23. As of the second quarter, Netflix reported adding 5.9 million new subscribers, bringing its global subscriber count to 238.4 million. While the company has seen a limited number of account cancellations due to the crackdown, it emphasized that the cancel reaction was low and that it has observed a healthy conversion of borrower households into full paying Netflix memberships.
Under the new account-sharing policy, a Netflix account is limited to one household and its members. However, in the U.S. and select other countries, the account holder has the option to add a member outside the home for an additional fee, or the user can transfer their profile and create their own account. Starting Thursday, Netflix will address account sharing in “almost all” of the remaining countries, including Indonesia, Croatia, Kenya, and India. In these countries, Netflix will not offer the option to add an extra member as it has recently lowered subscription prices there.
Thanks to the global launch of paid sharing and the rollout of its advertising tier, Netflix expressed increased confidence in its financial outlook. It expects accelerating revenue growth in the second half of 2023, with the full impact of the Q2 launch of paid sharing in the U.S. and other countries to become more apparent. Executives anticipate that some borrowers who were removed from an account may not immediately sign up for a new membership but may be drawn back in by certain shows or movies. Furthermore, Netflix attributed its revenue growth to new members acquired through the paid sharing initiative.
While the company has been relatively tight-lipped about the progress of its advertising tier, it mentioned that ad plan membership has nearly doubled since Q1. However, the current ad revenue is not material for Netflix since it is based on a small membership base. Netflix believes that over time, it can develop advertising into a multi-billion dollar incremental revenue stream. The company began rolling out its advertising tier in late 2022 and had almost 5 million monthly active users as of May.
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Recently, Netflix removed its $9.99 advertising-free “Basic” plan for new subscribers in the U.S. and U.K. In Canada, Netflix made the same move a month earlier. The options for consumers in these countries now include a “Standard with Ads” tier for $6.99, an ad-free “Standard” plan for $15.49, and an ad-free “Premium” plan for $19.99, which offers higher quality broadcasts and more streaming options.
The company’s password crackdown began in early February, with tests conducted in Latin America followed by a rollout in Canada, New Zealand, Spain, and Portugal. The U.S. launch was delayed in order to incorporate learnings from the earlier markets, including how to access accounts outside of the home. Initially, there was a cancel reaction to paid sharing in each market, impacting short-term member growth. However, many users later created their own profiles or adopted the paid-sharing plans, leading to increased membership and revenue.
Netflix remains optimistic about the future of paid sharing and its advertising tier, as it expects these initiatives to contribute to its continued growth and financial success.
