Following a trial run in Canada and three other countries globally, the company’s decision to charge for password-sharing in the U.S. has been made.
Netflix has taken a firm stance against password-sharing and has started implementing charges for such practices in the United States. After conducting successful trials of password-sharing fees in various countries worldwide, this action has been implemented.
Details of the Implementation:
Netflix recently began notifying account holders through email that their membership, which is being shared with someone outside their household, will now incur an additional charge. Account holders have two options: they can transfer the shared user’s profile to a new paid membership, or they can opt to pay an extra $7.99 per month to continue sharing the account.
Successful Trials and Revenue Growth:
Paid sharing trials were conducted in Canada, New Zealand, Spain, and Portugal during the first quarter of 2023. Netflix’s letter to shareholders stated that the company’s paid membership base in Canada surpassed pre-paid sharing levels, leading to accelerated revenue growth outpacing that of the United States.
Implications and Account Transfer:
When a paying member transfers a shared profile to a new membership, the person outside the account holder’s household will be required to subscribe to their own Netflix account to retain their watch history, lists, and other profile information.
Netflix’s Strategy and Revenue Base:
While the paid sharing program initially faced cancellations in the tested countries, Netflix observed increased acquisition, revenue, and activation of paid accounts by “borrowers.” The company believes that paid sharing will contribute to a larger revenue base and improve its services in the long term.
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Account Sharing Challenges:
Currently, account sharing among Netflix subscribers extends to over 100 million households, which undermines the company’s ability to invest in service enhancements and build its business.
Delayed Rollout and Improved Experience:
The broad rollout of the paid sharing program was initially planned for the first quarter of 2023 but was delayed to enhance the member experience. Netflix wanted to ensure a smoother implementation before launching it widely.
Primary Location Setting and Access Control:
With the introduction of paid sharing charges in the U.S., Netflix users will be required to set a primary location for their accounts. Access to the subscription from outside this designated location will be restricted unless additional charges are paid. However, users can still log into their accounts on mobile devices, tablets, or new TVs in vacation rentals or hotels.
Netflix Ad Plan Updates:
In addition to the password-sharing charges, Netflix made changes to its ad plan in April. The company reported positive revenue and minimal switching to ad-free subscriptions. Consequently, Netflix enhanced the ad plan by offering 1080p-resolution video quality (up from 720p) and allowing two concurrent streams.
Netflix’s decision to charge for password-sharing in the U.S. reflects the company’s efforts to increase revenue and prevent account-sharing practices that undermine its ability to invest in services and improve the user experience.
