Netflix will begin rolling out paid sharing in the U.S. and other countries in the second quarter of this year, the streaming giant announced Tuesday.
In January, Netflix confirmed that it would be cracking down more broadly on account sharing, after conducting trials in Latin America.
The crackdown began in earnest in early February, with Netflix rolling out “paid sharing” plans in Canada, New Zealand, Spain and Portugal. As part of those plans, the primary Netflix user has had the option to add two more people outside of their homes to the plan for additional CAD$7.99 per month per person in Canada, NZD$7.99 in New Zealand, 3.99 euros in Portugal, and 5.99 euros in Spain.
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Netflix did not reveal pricing for the U.S., or other countries that are part of the broader Q2 rollout, but said that the pricing will be higher in more affluent countries.
“We’ll look at that in a market-by-market basis, but obviously we tested different pricing in these last rollouts than we tested in Latin America and that gives you a sense about how we’re thinking about, you know what is optimal pricing, especially in more affluent countries,” co-CEO Greg Peters said on the earnings video.
Netflix said it is “pleased with the results” from Q1, but decided to shift the timing of the broader launch later in order to realize some of the learnings from the early markets, including how to have access to Netflix outside of the home.
“We’re pleased with the results of our Q1 launches in Canada, New Zealand, Spain and Portugal, strengthening our confidence that we have the right approach. As with Latin America, we see a cancel reaction in each market when we announce the news, which impacts near term member growth. But as borrowers start to activate their own accounts and existing members add ‘extra member’ accounts, we see increased acquisition and revenue. For example, in Canada, which we believe is a reliable predictor for the US, our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the US,” Netflix said in its Q1 earnings letter.
The motivation for Netflix is to use this feature to bring in more revenue, in a move widely praised by Wall Street. However, in January, the company had warned it would likely lead to some subscriber cancellations in the short term, with co-CEO Greg Peters noting that it will not be a “universally popular move.”
“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 January earnings letter.
Executives have also said that the paid-sharing option, as well the new ad-supported tier help give subscribers more price points to choose from and could help offset some cancellations. Many Wall Street analysts also see paid-sharing and the ad-tier working in tandem, with Macquarie analyst Tim Nollen saying he believes paid sharing can help “jump start” the ad tier.
