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Netflix to Crack Down on Password Sharing by Charging Users in the US

Netflix shared that over 100 million people are using an account they haven't paid for

Netflix to Crack Down on Password Sharing by Charging Users in the US

Outlook Start-Up Desk

POSTED ON April 19, 2023 12:03 PM

Netflix is set to introduce measures to curb the number of US customers who share their accounts with others, with plans to charge these users. This move could lead to growth in the latter half of the year. Netflix has already implemented a plan to charge users in four Latin American territories to reduce account sharing. The company has been testing ways to limit sharing in Latin America. 

Over 100 million people are currently using an account that they have not paid for, according to Netflix. Paid sharing may be a potential source of new customers or sales. The company was originally planning to start charging for password sharing in the US in the first quarter of 2023, but now states that it will happen in the next few months.

Netflix's first-quarter results were lower than expected, with the streaming service adding only 1.75 million customers instead of the 2.41 million anticipated by investors. The company has introduced two new initiatives, the password-sharing plan, and an advertising-supported tier, in response to its slower growth. 

In the first quarter, Netflix generated over $2 billion in free cash flow and reported net income of $1.31 billion.

The service added only 100,000 customers in the US and Canada, having lost almost one million customers last year. Nevertheless, it remains the most popular TV network in the US, accounting for over 7 per cent of all TV viewing, which is more than twice as much as any paid service.

The Asia-Pacific region continues to be Netflix's most significant source of new customers, with the company adding 1.46 million customers there in the quarter. Netflix has stated that it is becoming more sophisticated regarding pricing and lower prices in India and other poorer countries are contributing to growth.

The company has also increased its free cash flow estimate for 2023 to $3.5 billion and anticipates that new initiatives, such as the password-sharing plan and the advertising-supported tier, will enable growth to accelerate in the second half of 2023.

While the crackdown on password sharing may cause some customers to stop using the service in the short term, Netflix hopes that it will encourage them to pay for their account or to pay to share the one they currently use, which could boost sales in markets such as the US and Latin America.

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