Starting today, Netflix will move ahead with its plan to crackdown on password sharing in all the countries that were not the part of the first phase that went live earlier this year.
The streaming giant announced on Thursday that it will begin restricting account sharing for users who don't live in the same household from 20th July in countries like India, Indonesia, Croatia, and Kenya. The company confirmed the move in a letter to the shareholders during its Quarterly earnings call. Netflix further noted that the countries getting the ax now will not have an option to pay extra to add people to the same account, an option that was available to the users in other countries. The company defended its position by noting that its market penetration is low in these countries and most of them have received price cuts in the past.
Beginning today, we’ll start to address account sharing between households in almost all of our remaining countries. In these markets, we’re not offering an extra member option given that we’ve recently cut prices in a good number of these countries (for example, Indonesia, Croatia, Kenya, and India) and penetration is still relatively low in many of them so we have plenty of runway without creating additional complexity. Households borrowing Netflix will be able to transfer existing profiles to new and existing accounts.
Netflix first kicked off its password sharing crackdown earlier this year which went live for countries like the US, Canada and parts of Europe. With today's announcement, Netflix will expand the restrictions to over 100 countries. Along with the restrictions, Netflix also axed its basic ad-free tier in many countries. The company, however, will continue to offer ad-supported tier, membership count for which has doubled since Q1 2023.
While we continue to grow our reach—ads plan membership has nearly doubled since Q1— it’s still off a small membership base, so current ad revenue isn’t material for Netflix. Building an ads business from scratch isn’t easy and we have lots of hard work ahead, but we’re confident that over time we can develop advertising into a multi-billion dollar incremental revenue stream.
While, it is hard to comment on the long term consequences of this move, Netflix seems to be doing quite well in the short term. Immediately after the ban went live, Netflix started gaining new subscribers. This was further confirmed in the earnings report as the company added added 5.9 million users in the second quarter of 2023, compared to losing one million subscribers in the same quarter last year.