Netflix is set to crack down on US customers who share their accounts with others, with plans to charge such users, in a move that could see an increase in growth in the latter half of the year. The streaming giant has been testing ways to reduce account sharing in Latin America, where it has already rolled out a plan to charge users in four territories.
Over 100 million people use an account they don't pay for, according to Netflix. Analysts suggest that paid sharing could be a potential source of new customers or sales. Originally planning to begin charging for password sharing in the US in the first quarter of 2023, the company now says it will do so in the coming months.
Netflix's first-quarter results showed a lower-than-expected gain in subscribers, adding only 1.75 million customers instead of the 2.41 million expected by investors. The company has responded to its slowing growth by introducing two new initiatives: the password sharing plan and an advertising-supported tier. Netflix generated over $2 billion in free cash flow in the first quarter, reporting net income of $1.31 billion.
The service added just 1,00,000 customers in the US and Canada after losing almost one million customers last year. However, it is still the most popular TV network in the US, accounting for more than 7% of all TV viewing, more than double any paid service.
The Asia-Pacific region remains Netflix's biggest source of new customers, with the service adding 1.46 million customers there in the quarter. Netflix has said it is growing more sophisticated about pricing, with the lower prices in India and other poorer countries contributing to growth.
The company has also raised its free cash flow forecast for 2023 to $3.5 billion and predicts that new initiatives like the password sharing plan and the advertising-supported tier will allow growth to accelerate over the course of the second half of 2023.
Although the crackdown on password sharing may cause some customers to stop using the service in the short term, Netflix hopes that this will prompt them to pay for their own account or to pay to share the one they currently use, which could boost sales in markets like the US and Latin America.
(With agency inputs)