Netflix's paid password sharing to roll out "more broadly" in Q1 2023

After a tough 2022, Netflix plans to boost its revenue growth through new initiatives like paid password sharing and its advertising offering, the company said in a letter to shareholders on January 19.

This move as the video streaming giant witnesses a leadership shuffle with co-founder Reed Hastings stepping down as co-chief executive and becoming the company's executive chairman after 25 years of running the firm.

Greg Peters, who has been serving as the company's chief operating officer and chief product officer, has now been elevated as the co-Chief executive officer. He has been leading the company's push into advertising and initiatives such as cracking down on password sharing. Ted Sarandos, who was named co-CEO in July 2020, continues to remain in the role.

"We start 2023 with renewed momentum as a company and a clear path to reaccelerate our growth. I’m thrilled about Ted and Greg’s leadership, and their ability to make the next 25 years even better than the first" Hastings said in a statement.

"There's no big strategy shift or big culture shifts," Peters said during a video interview for investors on January 19.

Netflix also elevated its head of global television Bela Bajaria as chief content officer, a title that was previously held by Sarandos. Scott Stuber, currently serving as head of global film, has been appointed as chairman of Netflix Film.

Paid-password sharing in late Q1 2023

In the letter, Netflix said it plans to roll out paid-password sharing "more broadly" in the later part of Q1 2023. The company, which has been piloting various ways to crack down on password sharing in select countries, is anticipating this launch to impact its member growth in the near term, but will resulted in "improved overall revenue"

"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" Netflix said in its shareholder letter.

Through paid sharing, members will have the option to pay an extra fee if they want to share their Netflix account with people they don’t live with. The company however noted that all members will be able to continue watching content on their account while traveling.

In recent months, Netflix has also introduced new features to facilitate this change. It now allows people to transfer a profile to a new account as well as review which devices are using their account.

“Our job is to give them a little bit of a nudge and to create features that make transitioning to their own accounts easy and simple,” Peters said in the video interview.

Advertising foray

Another key focus area has been growing the company's ad-supported tier. Launched in November 2022 across 12 countries, Netflix said these lower-priced plans have resulted in increased membership growth and 'better-than-expected' customer engagement. These plans are not available in India at present.

"We’ve seen very little switching from other plans. Overall the reaction to this launch from both consumers and advertisers has confirmed our belief that our ad-supported plan has strong unit economics and will generate incremental revenue and profit" the shareholder letter read.

The launch, which marked a major shift in Netflix's stance against advertising, came in the backdrop of the service posting two successive quarters of decline in member base in the first half of 2023. These initiatives also come amid increased competition from deep-pocketed players such as Disney, Amazon, and Apple among others.

That said, Netflix finished the year on a high note, adding 7.66 million members during the quarter that takes its global subscriber base to 230.75 million.