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Netflix Implements Password-Sharing Charges in the United States

Netflix, in a bid to address password-sharing practices, has taken a strong stance by implementing charges for such activities in the United States. Following successful trials conducted in various countries, the company has now extended this action to its U.S. subscribers.

Implementation Details

Account holders in the United States are being notified via email that sharing their membership with individuals outside their household will incur an additional charge. Two options are provided: transferring the shared user’s profile to a new paid membership or paying an extra $7.99 per month to continue sharing the account.

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Successful Trials and Revenue Growth

During the first quarter of 2023, Netflix conducted paid sharing trials in Canada, New Zealand, Spain, and Portugal. The trials in Canada, in particular, resulted in the paid membership base surpassing pre-sharing levels, leading to accelerated revenue growth that outpaced that of the United States.

Implications and Account Transfer

When a paying member transfers a shared profile to a new membership, the person outside the account holder’s household will be required to subscribe to their own Netflix account to retain their watch history, lists, and other profile information.

Netflix’s Strategy and Revenue Base

Despite initial cancellations during the trials, Netflix observed increased acquisition, revenue, and activation of paid accounts by “borrowers.” The company believes that implementing paid sharing charges will contribute to a larger revenue base and improve its services in the long term.

Account Sharing Challenges

Account sharing among Netflix subscribers currently extends to over 100 million households, undermining the company’s ability to invest in service enhancements and business growth.

Delayed Rollout and Improved Experience

The broad rollout of the paid sharing program was initially scheduled for the first quarter of 2023 but was delayed to ensure a smoother implementation. Netflix aimed to enhance the member experience before launching it widely.

Primary Location Setting and Access Control

With the introduction of paid sharing charges in the U.S., Netflix users will be required to set a primary location for their accounts. Access to the subscription from outside this designated location will be restricted unless additional charges are paid. However, users can still log into their accounts on mobile devices, tablets, or new TVs in vacation rentals or hotels.

Netflix Ad Plan Updates

In addition to the password-sharing charges, Netflix made changes to its ad plan in April. The company reported positive revenue and minimal switching to ad-free subscriptions. As a result, Netflix enhanced the ad plan by offering 1080p-resolution video quality (up from 720p) and allowing two concurrent streams.