Netflix estimated about 222 million paying accounts have shared passwords with more than 100 million viewers.
Heaptalk, Jakarta — An American streaming service and production company Netflix will soon close password sharing access starting in early 2023 as reported by The Wall Street Journal. The action will force viewers to pay to enjoy the stream, not by borrowing a password.
Researchers inside Netflix revealed that password sharing has been the main cause of declining subscription numbers in 2019. Since then, the company has carefully explored strategies to address the issue without alienating existing subscribers.
Despite the risk of causing unfavorable reactions from consumers, Netflix will still stop sharing passwords as an effort to improve the slowdown in growth, particularly in the US market. Therefore, the regulation is planned to begin in the United States first.
The company estimated about 222 million paying accounts have shared passwords with more than 100 million viewers. That is the number that Netflix wants to convert into paying subscribers. The company has initiated trials of additional payments for password sharing in Latin American countries, charging an additional payment of $3. In these countries, the primary account owner must share a verification code with anyone outside the household who wishes to access the account. Netflix will repeatedly ask for the code until a monthly fee is paid to add non-household subscribers.
The strategy can be implemented in the United States, with Netflix may ask for a price below its US$6.99 ad-supported plan for non-household subscribers who share someone’s plan. However, Netflix will encourage those who have a shared password to sign up for their own subscription.
Netflix has also updated its customer support page which emphasizes that accounts should only be shared with people who live together. The company will apply the rule based on IP addresses, device IDs, and account activity.
Earning an additional $721 million in revenue
In addition to eliminating password sharing, Netflix is also displaying ads in content starting in November to add more revenue after years of resisting them. The ads are offered at a more affordable price of $6.99 per month in the US.
According to Statista, Netflix generated total revenue of nearly US$7.93 billion in Q3 2022, a raise from about US$7.48 billion in Q3 2021. The company’s annual revenue in 2021 amounted to almost US$30 billion, which increased from US$24.9 billion in 2020.
Analysts at Cowen Inc. calculate that with the strategy, Netflix can earn an additional $721 million in revenue by 2023, specifically in the United States and Canada as both have about 30 million password sharers. The result is based on a survey of consumers who share the account of a person outside the household.
