Netflix’s global password sharing crackdown helps it gain 7.6 million new subscribers. Will this work in India?

In May, US streaming giant Netflix announced a crackdown on password sharing in over 100 countries, including the United States, UK, France, Germany, Australia, Singapore, Mexico, and Brazil. The move has helped the company gain 7.6 million new subscribers from January to June as compared with a loss of 1.2 million subscribers in H1CY22. The company has reported an 8 per cent year-on-year global subscriber growth in Q2CY23. Experts say that further growth is expected in H2 because this feature has been introduced in emerging markets including India.

According to Netflix’s new policy, a single account can only be used within one household. This means that family members living together can still enjoy Netflix on various devices, whether they are at home, on vacation, or on the move. Netflix offers features like “Transfer Profile” and “Manage Access and Devices” to make it easier for family members to share the account within the same household. These new measures will put an end to account sharing practices with people outside the primary household.

According to Elara Capital, this is indeed a very innovative model to drive subscription revenue growth, in developed nations as those markets are largely penetrated and emerging nations where ARPU (average revenue per user) is lower. Experts say that some Indian broadcaster-led OTT giants could follow this model to drive subscription revenue in a price sensitive market. “We believe one leg of subscription revenue, ARPU, will see pressure over near to medium term due to premium content being offered for free. Thus, paid sharing is a great business model to drive higher subscriber base,” Karan Taurani, vice president of Elara Capital, said.

Netflix’s Q2CY23 revenue stood at $8,187 million, a growth of 0.3 per cent QoQ and 2.7% YoY. The company expects revenue growth to accelerate in the second half of CY23 as it will have the full benefits of paid sharing plus continued steady growth in the ad-supported plan.

In the last few months, Netflix has been working to improve the monetization through initiatives like paid sharing and advertising. “This will allow the company to generate more revenue off a bigger base, which can be reinvested to make Netflix even better for members. Netflix will start cracking down on account sharing in India and other markets such as Indonesia, Croatia, and Kenya starting July 20. The company will not offer the extra member option in these markets since they had recently cut prices in many of them, and the penetration is still relatively low, giving the company plenty of runway without creating additional complexity,” Elara Capital said in a report.