This week, Netflix announced its plans to further crackdown on password sharing outside of the subscriber’s own households. Notably, the move includes most of its largest markets, including the United States, which represents almost 30% of the company’s total subscribers and around 40% of its total revenue. Ampere Consumer data suggests that Netflix account sharing is most prevalent in France, the Netherlands, Poland and the Nordics, and is least common in APAC (perhaps why the clampdown is yet to kick off in South Korea and Japan – the only ad-supported Netflix markets where this is the case).
The move also expands beyond the recent crackdown markets of Spain, New Zealand, Canada and Portugal. Ampere Analysis’ Q1 2023 Consumer wave, which occurred shortly after this crackdown in February, saw a 20% drop in respondents in both Spain and Canada saying they used a Netflix login from someone outside of their household, representing a fairly significant drop in account sharing early on.
While it is likely the move might have seen initial churn in these markets, Ampere Analysis still expects Spain, New Zealand, Canada and Portugal to have seen subscriber growth in the first quarter, while the recent ad-supported tier upgrade in Spain and Canada may help to lure some of these churned customers back moving forward. The pricing for the ad-supported tier (allowing two concurrent streams) is actually lower than adding a single outside-your-household user to your account in Canada and Spain: in Canada adding an additional user costs CAD 7.99 per month, 33% more than the cost of the ad-supported tier at CAD 5.99 per month, while in Spain the €5.99 per month cost of the adding an additional user is around 9% more than the €5.49 per month cost of the ad-supported tier.
Australia and the United States are the only other markets where the cost of adding an additional user is higher than the cost of the lowest tier, while the costs are the same in Germany, France and the UK. As such, any consumers currently using Netflix logins of people they do not live with may decide to simply pay the extra cost to carry on accessing Netflix, particularly if they were already splitting the cost (rather than freeloading).
In most other markets, the extra cost of adding an additional user is lower than the cost of the lowest-cost tier. In Poland, for example, where account sharing is prevalent, it costs just PLN 9.99 per month to add an extra user, around two thirds cheaper than the price of a basic tier, while in Sweden, where account sharing is similarly prevalent, the price difference is 51%. This suggests that in these markets Netflix may be trying to make the additional cost less daunting in the hopes of retaining customers and generating more revenue overall.
“In markets where the lowest-cost tier costs less than adding an extra user, Netflix may be hoping consumers opt for the low-cost tier. In its Q1 results, Netflix claimed the ad-supported tier generated more revenue per subscriber per month than the standard tier, so this represents a strong revenue opportunity among new customers, even if a small proportion of current account sharers churn entirely. Netflix previously said that around 100 million subscribers were sharing their accounts, so despite the potential for churn among these consumers, the long-term revenue impact for Netflix could still be a positive one,” concluded Toby Holleran, Research Manager at Ampere Analysis and the author of the report.
Related News
