Netflix Initiates Crackdown on Password Sharing in India and Other Markets from Today

Starting from July 20, Netflix will take action against account sharing in markets such as India, Indonesia, Croatia, and Kenya to boost revenue growth in the latter half of 2023. However, the approach to address account sharing in India and other countries differs from the rest. While the company offers a 'paid sharing' feature in some markets, allowing users to pay extra to share their accounts with non-household members, they will not introduce this option in the mentioned countries. Netflix justifies this decision by pointing out recent price cuts and lower penetration in these regions, providing ample opportunity for growth without added complexity.

In India, Netflix had previously reduced its service prices by 20-60 percent in December 2021, resulting in a 30 percent YoY increase in engagement and 24 percent revenue growth in 2022 compared to 2019. Nevertheless, Netflix remains one of the more expensive video streaming services in the Indian market.

The crackdown on password sharing has proven successful for Netflix in most of its markets. The company expanded the paid sharing feature to over 100 countries, accounting for over 80 percent of its revenue. Revenue and paid memberships in these regions increased after the paid sharing launch, with new member sign-ups surpassing cancellations.

Netflix added 5.9 million paid members in Q2 of 2023, in contrast to losing nearly one million members during the same period last year. The total subscriber base reached 238.4 million subscribers for the quarter.

While the initiative's impact on Netflix's revenues was modest in Q2 of 2023, the company anticipates significant benefits from paid sharing in the later part of the year, particularly in Q4 of 2023. Netflix's CFO, Spencer Neumann, highlighted that the company's revenue growth in the coming year will be driven largely by the paid sharing rollout.

In Q2 of 2023, Netflix's revenue increased by 2.7 percent YoY to $8.19 billion, with operating income rising by 16 percent YoY to $1.8 billion.

Furthermore, Netflix mentioned that its ad-tier subscribers nearly doubled since the first quarter, but ad revenue is not yet substantial due to its small membership base. However, the company is optimistic about building an advertising business, expecting it to become a multi-billion dollar incremental revenue stream in the future.