Streaming major Netflix on Thursday said it has begun cracking down on password sharing in India, a practice where a user shares his account with friends and relatives outside his household.
While the restrictions have been in place globally for some time now, India and a few other markets such as Indonesia, Croatia and Kenya were kept out of it until now.
In a letter to shareholders and a call with analysts on Thursday following announcement of its June quarter results, Netflix said it will not offer the “extra member” option in these markets, since they had recently cut prices in these countries.
This would give Netflix “plenty of runway (for growth) without creating additional complexity”. Netflix, for the uninitiated, follows a January to December accounting year.
Analysts see the move by Netflix as a means to shore up subscriber numbers in India, which is a priority market for the US-based streaming major.
Netflix is estimated to have a subscriber base of around 6 million in India, according to industry experts, while rival Amazon Prime Video is estimated to have a subscriber base of around 20 million.
Paid subscribers of Disney+ Hotstar, according to its March quarter results, stood at 52.9 million. Disney will declare its June quarter numbers next month.
Netflix had reduced the price of its service in India by 20-60% in December 2021, which had helped the company grow engagement in the country by nearly 30% year-on-year (YoY), while revenue growth increased 24% in 2022 versus 19% in 2021, it said in April.
Netflix’s mobile-only plan, earlier priced at Rs 199 per month, now costs Rs 149. Similarly, the basic plan allowing access to all content on any one device is priced at Rs 199 per month versus Rs 499 earlier. In contrast, Amazon Prime Video and Disney+ Hotstar monthly plan comes at a starting price of Rs 299 per month respectively.
During the earnings call on Thursday, Netflix chief financial officer Spencer Neumann said most of the company’s revenue growth this year will come from a rise in volume through new paid memberships, which will be “largely driven” by the company’s paid sharing rollout.
Paid sharing is a feature where Netflix asks its users to pay for anybody viewing its service outside a household.
“It is our primary revenue accelerator in the year and we expect that impact to build over several quarters” he said.
For the June quarter, Netflix saw its global revenue increase 2.7% YoY to $8.19 billion while operating income rose 16% YoY to $1.8 billion. The company does not give a breakup of its India revenue or subscribers in its quarterly results.
For the June quarter, Netflix said that revenue and paid memberships in the markets where a crackdown on password sharing was introduced was higher than before, with new member sign-ups already exceeding cancellations.
Netflix added 5.9 million paid members in the second quarter of 2023 as compared with losing nearly one million members in the same quarter last year. The service’s overall subscriber base stood at 238.4 million for the June quarter.
While the impact of the paid sharing initiative on Netflix’s global revenue was muted in the second quarter of 2023, the company said it expected to see the “full benefits” of paid sharing in the later part of this year, particularly in the December quarter.