Netflix has announced its decision to crack down on password-sharing among consumers in South Africa and all other markets, commencing today.
The streaming giant’s limited rollout of this restriction in the previous quarter led to a remarkable increase of nearly 6 million subscribers by the end of June.
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Previously, Netflix had supported the practice of account password-sharing but is now facing complex challenges to its business prospects due to its widespread adoption.
Last year, the company initiated testing of the restriction, expanding it to countries like Canada, New Zealand, Portugal, Spain, and the U.S. during 2023.
In certain regions, Netflix had permitted password-sharers to pay extra to accommodate their friends.With the latest move, Netflix aims to tackle account sharing across households in nearly all remaining countries, starting this Thursday.
However, the company clarified that it would not introduce an additional membership option for customers in these newly enforced regions.
The rationale behind this decision is the relatively low market penetration in these areas, along with the availability of more economical Netflix subscription tiers, as stated in a letter to shareholders.
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“In these markets, we’re not offering an extra member option given that we’ve recently cut prices in many of these countries (for example, Indonesia, Croatia, Kenya, and India)”
The effects of Netflix’s password-sharing crackdown were evident in the robust subscriber growth reported for the quarter ending June.
After witnessing a loss of nearly 1 million customers during the same period the previous year, the company’s subscriber count increased by 5.9 million, primarily due to individuals opting to pay for their own accounts instead of sharing at no cost.
Netflix’s Chief Financial Officer, Spence Neumann, emphasized that the revenue growth for the firm is “largely driven by our paid sharing rollout.”
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He added, “It is our primary revenue accelerator in the year, and we expect that impact… to build over several quarters.”
As Netflix continues its efforts against password-sharing, it may face challenges in maintaining its competitive edge in various markets.