by Thinus Ferreira
As Netflix expands its password crackdown process to further countries, including soon the United States, the global video streaming service admitted on Tuesday night that there is "a cancel reaction" as subscribers drop the service, although some account borrowers are moved to sign up for their own accounts.
In its first quarter 2023 earnings report released on Tuesday night, Netflix said that it is expanding its password crackdown initiative to further countries during the second quarter (April to June) of this year, and implementing what it has learned from the process in countries where it has cracked down on password sharing so far.
In order to try and boost revenue as the global acquisition of streaming subscribers for all streamers are slowing, Netflix is blocking devices where the streamer believes that a Netflix-subscribed household is sharing passwords outside of family members, forcing them to sign up for their own accounts.
In January Netflix said that it believes password sharing is taking place through at least 100 million of Netflix households.
"In the first quarter we launched paid sharing in four countries and are pleased with the results. We are planning on a broad rollout, including in the United States in the second quarter" and in the vast majority of countries where it's operating, Netflix said in its Q1 shareholder letter.
Netflix started with password crackdown testing last year in the Latin American countries of Chile, Costa Rica and Peru, after it introduced its password crackdown process - something it calls "paid sharing" in February in Canada, New Zealand, Portugal and Spain, and admitted that the step leads to an increase in the volume of Netflix subscribers who cancel every quarter.
"As with Latin America, we see a cancel reaction in each market when we announce, which impacts near-term member growth," Netflix stated in its first quarter shareholder letter, noting however that "as borrowers start to activate their own accounts and existing members add 'extra member' accounts, we see increased acquisition and revenue."
"With each launch, we learn more about how best to roll out these changes and what matters to members the most, in particular maintaining travel/watching on the go and the ability for people to better control access to their accounts as well as transfer profiles to separate accounts."
Netflix said it "found enough improvement opportunities in these areas to shift a broad launch to the second quarter to implement those changes" and that "Longer term, paid sharing will ensure a bigger revenue base from which we can grow as we improve our service".
Greg Peters, Netflix co-CEO, in the first quarter earnings video, said that "Obviously we tested different pricing in these last rollouts than we tested in Latin America and that gives you a sense about how we're thinking about what is optimal pricing, especially in more affluent countries".
Netflix rival MultiChoice started its own password crackdown process in March 2022, limiting DStv subscribers to just one online watch stream from an account, in a move that was met with heavy criticism and backlash by customers.
Later in 2022, MultiChoice said it had been rethinking its password-sharing strategy but the Randburg-based pay-TV operator is yet to introduce or announce any changes.
