Netflix password-sharing crackdown coming; streamer says 100M households don’t pay

In an earnings letter to shareholders on Tuesday, Netflix said it estimates that more than 100 million households are watching the service without paying, by sharing accounts with households with .

In March, the streaming company said it would be testing a new feature in Costa Rica, Chile and Peru to detect account sharing and allow for cheaper creation of sub-accounts. This has led many to suggest that a broader crackdown on account sharing is imminent. Netflix’s shareholder statement confirms this is the focus of the company for the coming year, and as justification shows the enormous scale of the account-sharing operation.

“In addition to our 222 million paying households, we estimate that Netflix is ​​being shared with over 100 million other households, including over 30 million in [the U.S. and Canada],” the company said. That means almost a third of households using Netflix don’t pay for it.

Netflix explained to its shareholders that the massive increase in its subscriber count during the pandemic has obscured the fact that it is facing some challenges in expanding its audience. its giants further – including things like increased competition in online entertainment, access to TV connections and data costs. These factors are behind its recent slowdown in growth. Meanwhile, to increase revenue, it will seek to monetize the large number of households that are currently not paying for the service.

Netflix says:

Another focus is on the best way to monetize sharing – more than 100 million households use another household’s account. This is a huge opportunity because these households are already watching Netflix and enjoying our service. Sharing could have helped fuel our growth by getting more people to use and enjoy Netflix. And we’re always trying to make family sharing easy, with features like profiles and multiple streams. While these are very popular, they have created confusion about when and how Netflix can be shared with other households. So early last year we started testing different approaches to monetization from sharing and in March introduced two new paid sharing features where existing members have the option to pay to other households, in three markets in Latin America. There is a wide range of engagement when it comes to sharing households from the high end to the occasional viewing. So while we can’t monetize it all right now, we believe it’s a huge short to medium term opportunity.

While bending backwards to sound non-threatening, the passage also explains why Netflix previously chose not to enforce its terms and conditions, which forbid external account sharing. family. It seems that the company has considered the widespread popularity of Netflix through sharing as a useful viral marketing tool. But now, with market saturation approaching, it becomes imperative to turn some of those sharing households into paying customers.

Paid sharing features being tested allow any Netflix viewing profile to be split into its own full account – so things like personalized lists and viewing preferences won’t be lost – or to one of the new sub-accounts. Up to two extra accounts can be added to a Standard or Premium subscription, and they don’t cost as much as a full Netflix subscription.

In an investor relations video posted with the letter, chief product officer and CEO Greg Peters said that the company will take some time to refine its approach and rollout of paid account sharing. fees in all markets. “My belief is that we’re going to go through an iterative year and then roll out all of that so we can deliver a solution globally,” he said.