It’s a limited test for now, but Netflix said it’s bringing the features to these three markets so it can understand how well they work before potentially rolling them out to the rest of the world. Now the people sharing passwords may have to pay a charge that is slightly below the ad-supported plan. According to estimates put forward by the company, over 100 million Netflix viewers watch shows and movies on the streaming service app or website using passwords borrowed from friends and family. This arrangement will be put to an end starting in 2023. The United States may be used as the testing ground for the decision.
Netflix has for much of its history turned a blind eye to password-sharing. But with the company now serving nearly 222 million subscribers and competing in a crowded market, it’s thinking of new ways to bring in revenue for premium content so in can bring in new users, keep old ones happy and compete with rivals like Disney+.
Netflix has started testing their feature of additional fees for password sharing in a few Latin American countries and they are charging around $3 extra. Under this arrangement. now the actual subscriber in these countries will have to provide a verification code to anyone outside the household wanting to access the account. Its investors are worried about slowing growth. Netflix’s stock is down 41% this year, and the company issued a subscriber outlook in January that was weaker than expected.
Netflix announced in its Q1 2022 earning report that it lost 200,000 subscribers due to fierce competition and the war in Ukraine. The loss of 700,000 subscribers was one of the reasons they suspended services in Russia. The second quarter was even worse, with the company losing nearly 1 million subscribers, the biggest loss in company history. Following the report, Netflix’s stock tumbled 26%, erasing about $40 billion of stock market value.
Netflix has known it for long that their password sharing feature is a reason for their low profits but they were hesitating in executing the decision since this would make the customers angry. Then the company ignored the problem after pandemic struck, leading to a surge of subscribers in 2020.
Netflix said in its blog post that features like separate profiles and multiple streams for its standard and premium plans were intended for people who live together, but they have “created some confusion about when and how Netflix can be shared. As a result, accounts are being shared between households — impacting our ability to invest in great new TV and films for our members.”
With “Extra Member,” people who subscribe to Netflix’s standard and premium plans can pay to add an account for up to two people they don’t live with. Though the third quarter of 2022 brought the news to the company reporting the addition of 2.41 million global subscribers. However, Netflix CEO Spencer Neumann, said during the company’s earnings call that they’re “still not growing as fast as they’d like,” which brings us to the decision to kill password sharing.