Netflix confirmed Thursday that it will be cracking down on account sharing “more broadly” in the coming months.
The change would limit a Netflix account to users within one household, rather than shared with multiple external users. Account holders who want to share with users outside the home can pay an extra fee to keep those profiles (though exact pricing has not yet been released). All members will still be able to use their account while traveling and view shows on both TVs and mobile devices.
“Today’s widespread account sharing (100M+ households) undermines our long term ability to invest in and improve Netflix, as well as build our business. While our terms of use limit use of Netflix to a household, we recognize this is a change for members who share their account more broadly,” Netflix said in its fourth-quarter earnings letter.
Netflix, which has 230 million-plus global subscribers, said it expects to start making the expansion at the end of its first quarter, with the rollout staggered across countries throughout the next couple quarters. The company typically reports its first-quarter earnings at the end of April.
These changes had already been put in motion in countries such as Chile, Costa Rica, Peru, Argentina, the Dominican Republic, El Salvador, Guatemala and Honduras. And Netflix had long hinted that it would expand its crackdown on account sharing to other countries. In preparation, the streamer tested out features and rolled out a profile transfer feature in October that allowed users to move their viewer profiles, including viewing histories and “my list” selections,” to new accounts.
The broader crackdown is expected to bring more revenue to the company, alongside its newly launched advertising tier, in a move that Wall Street has warmly embraced, as it continues to look for profits over subscriber growth.
Speaking during the company’s earnings interview Thursday, Greg Peters, who was just named co-CEO alongside Ted Sarandos, said part of the reasoning behind introducing the paid sharing accounts, wherein users could pay a few extra dollars for additional accounts, was to introduce more price points to consumers, in addition to the ad-tier and the tier without any ads.
“Some of it is economically driven. Part of what we’re trying to do is make sure that we are being responsive to that and finding the right price points, whether in terms of the individual account or an extra member affordance. And obviously the ad-supported plans give us a lower consumer-faced pricing in those countries where we have advertising,” Peters said.
But he added that some users are just mooching.
“Part of it is what we call casual sharing, which is people could pay, but they don’t need to and so they’re borrowing somebody’s account. So our job is to give them a little bit of a nudge and to create features that make transitioning to their own account easy and simple,” he said.
The company warned that it will likely lead to some subscriber cancellations in the short term, with Peters noting on the interview that it will not be a “universally popular move,” but lead to greater revenue growth moving forward.
“From our experience in Latin America, we expect some cancel reaction in each market when we roll out paid sharing, which impacts near term member growth. But as borrower households begin to activate their own standalone accounts and extra member accounts are added, we expect to see improved overall revenue, which is our goal with all plan and pricing changes,” the letter reads. (Netflix currently has 41.7 million paid members in Latin American countries, and added 1.76 million subscribers in the region in the fourth quarter of 2022.)
“It’s the must-see-ness of the content that will make the paid sharing initiative work, that will make the advertising launch work, that will make continuing to grow revenue work,” said Ted Sarandos, who is now the company’s executive chairman.
