Netflix to crack down on password sharing in India, other markets from today

Starting today, Netflix will be sending an email to members who are sharing accounts outside their household in India.

Netflix will start cracking down on account sharing in India and other markets such as Indonesia, Croatia, and Kenya starting July 20, as the video streaming major looks to boost its revenue growth in the second half of 2023.

The company is, however, taking a different strategy towards addressing the account sharing problem in India and the remaining countries where it hasn't rolled out paid sharing, a feature that allow users to shell out an extra fee to continue sharing their Netflix account with people they don’t live with.

In a letter to shareholders, Netflix said it will not offer the 'extra member' option in these markets since they had recently cut prices in many of them, and the penetration is still relatively low, giving the company "plenty of runway without creating additional complexity"

Netflix had reduced the prices of its service in India by 20-60 percent in December 2021, a move that had helped the company grow engagement in India by nearly 30 percent year-on-year (YoY), while revenue growth increased to 24 percent in 2022 versus 19 percent in 2021, it said in April 2023.

Read: Netflix's co-CEO Ted Sarandos sees India as a 'big prize'

That said, the service remains among the costliest video streaming service in India.

Netflix said members who are borrowing Netflix accounts will be able to transfer their existing profiles to new and existing accounts. The company  will begin sending an email to members who are sharing Netflix accounts outside their household in India starting today, it said.

Password-sharing crackdown paying off

The move comes after the service's crackdown on password sharing appears to be paying off in most of its markets. In May, the video streaming service expanded paid sharing to over 100 countries, that account for over 80 percent of our revenue.

In a letter to shareholders, Netflix stated that revenue and paid memberships in each of these regions was higher than before the paid sharing launch, with new member sign ups already exceeding cancellations.

Netflix added 5.9 million paid members in the second quarter of 2023, as compared to losing nearly one million members in the same quarter last year. The service's overall subscriber base stood at 238.4 million subscribers for the quarter.

While the impact of this initiative on Netflix's revenues was muted in the second quarter of 2023, the company stated that it is still in "early stages of monetization" and they expect to see "full benefits" of paid sharing in the later part of this year, particularly in Q4 2023.

During the company's post-earnings interview on April 19, Netflix chief financial officer Spencer Neumann said most of the company’s revenue growth this year is going to come from a rise in volume through new paid memberships, which will be “largely driven” by the company’s paid sharing rollout.

"It is our primary revenue accelerator in the year and we expect that impact to build over several quarters" he said.

For Q2 2023, Netflix saw its revenue increase by 2.7 percent YoY to $8.19 billion while operating income rose by 16 percent YoY to $1.8 billion.

In the shareholder letter, the company said its ad-tier subscribers nearly doubled since the first quarter, but it is still off a small membership base, due to which the current ad revenue isn’t material for Netflix.

"Building an ads business from scratch isn’t easy and we have lots of hard work ahead, but we’re confident that over time we can develop advertising into a multi-billion dollar incremental revenue stream" it said.