Netflix said a crackdown on password-sharing among U.S. subscribers is coming by the end of June, modestly delaying a plan that has caused consternation among many subscribers of the streaming service.
In its quarterly earnings report this week, Netflix said it would launch a paid password-sharing program globally in the second quarter of the year, including in the U.S. The company had earlier said it planned to introduce it by the end of March.
“That launch we’re doing in Q2 is a very broad launch, it includes the United States, it includes many, many other countries,” Netflix co-CEO Greg Peters told investors on an earnings call Tuesday.
Peters said the company considered launching the paid sharing program in the first quarter, but decided “it was better to take a little bit of extra time” and “make this transition as smooth as possible as we can for members.”
“We’re working hard to make sure that we do it well and as thoughtfully as we can,” he said.
Backlash expected
News that Netflix would no longer allow users to share their passwords broadly has roiled its fan base. The strategy shows a 180-degree shift for the streaming company, which once encouraged password sharing as a way to attract more viewers.
Now, as it faces competition for streaming viewers from Disney+, Hulu, Peacock and Paramount+, Netflix is looking to make more money from its existing subscribers.
The company expects some backlash and cancellations from users once it requires sharers to pay up.
“Very much like a price increase, we see an initial cancel reaction, and then we build out of that both in terms of membership and revenue as borrowers sign-up for their own Netflix accounts and existing members purchase that extra member facility for folks who they want to share with,” Peters told investors.
That’s what has happened every time Netflix has rolled out “paid sharing” in a country, the company said, citing a “cancel reaction” to the program in Canada, New Zealand, Spain and Portugal, when Netflix first started requiring password-sharers to pay more.
“As a reminder, as we roll out paid sharing — and as some borrowers stop watching either because they don’t convert to extra members or full paying accounts — near term engagement, as measured by third parties like Nielsen, will likely shrink modestly,” the company wrote.
Over time, however, it believes this strategy will grow its membership.
Netflix estimates more than 100 million households worldwide share passwords with other people.
The company clearly “wants to manage any fallout from the new [password sharing] strategy,” Jamie Lumley, analyst at Third Bridge, said in a note. “Whether the launch gets further delayed is a big question as we head into the next few months.”
