Netflix may charge users for account sharing, launch ad-supported version
Management reveals future plan in the wake of the California-headquartered streaming giant losing 200,000 subscribers globally during January-March 2022
- Apr 20, 2022,
- Updated Apr 20, 2022 10:55 AM IST
Netflix is considering charging users for account sharing and introducing an ad-supported version globally to boost revenues, according to co-founder Reed Hastings, as the California-headquartered streaming giant lost 200,000 subscribers world over during January-March 2022 and expects to lose another 2 million subscribers in the April-June quarter.
This comes after the management had earlier said it would add 2.5 million subscribers in the January-March quarter. After seeing peak growth during the pandemic when viewers were confined to their homes, the company now said in its letter to its shareholders that “The big COVID boost to streaming obscured the picture until recently”, referring to how stiff competition from entertainment companies launching their own streaming services as well the as the practice of password-sharing by subscribers have stalled their growth.
“We're working on how to monetise sharing. We've been thinking about that for a couple of years. But when we were growing fast, it wasn't the high priority to work on. And now, we're working super hard on it,” said Hastings, also the Chairman, President & Co-CEO, at the post-result analyst call on Tuesday evening local time.
He reasoned that over 100 million households already view Netflix. “They love the service. We just got to get paid at some degree for them.”
It is common knowledge that users share their streaming account credentials to avoid paying for the service. Netflix sees “a tremendous opportunity” in this group as a way of boosting their revenues.
“So, if you've got a sister, let's say, that's living in a different city, you want to share Netflix with her, that's great. We're not trying to shut down that sharing, but we're going to ask you to pay a bit more to be able to share with her and so that she gets the benefit and the value of the service, but we also get the revenue associated with that viewing,” said COO & Chief Product Officer Gregory Peters.
The management, however, expects the revenue boost to show up in the form of increased ARM (average revenue per member) and engagement as opposed to an increase in subscriber count. The sub-accounts will not count as subscribers, the team clarified. “So, you should expect that member numbers or subscriber numbers are sort of less relevant over time because these -- it may very likely show up in ARM,” said CFO Spencer Neumann.
Last month, Netflix announced that it was testing a new feature in Chile, Costa Rica and Peru to allow primary account holders to add up to two users outside their households for a small fee. Now, after a year or so of light test launches, the team said it expects another year or so of iterations before it can start monetising account-sharing globally.
Meanwhile, Netflix is also considering launching an ad-supported low-cost version after staunchly remaining ad-free to retain its simplicity of use among a sea of ‘freemium’ streaming platforms, which offer some ad-supported content for free, while pricing the ad-free ones.
“Those who have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I'm a fan of that, I'm a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense,” said Hastings.
It will take Netflix a year or two to figure it out, he said, adding that there might not be a test pilot involved given that the model is already working well for rivals Hulu, Disney and HBO. “But again, it would be a plan layer, like it is at Hulu. So, if you still want the ad-free option, you'll be able to have that as a consumer. And if you would rather pay a lower price and you're ad-tolerant, that's also -- we're going to cater to you also,” said Hastings.
Netflix’s revenue rose from $7.7 billion as of December 2021 to to $7.9 billion as of March 31, 2022. Its net income fell to $1.6 billion as of March 31, 2022 from $1.7 billion a year ago.
Also read: Netflix explains why it lost subscribers for the first time in a decade
Also read: Netflix is rolling out another way to rate content and curate your homepage better
Netflix is considering charging users for account sharing and introducing an ad-supported version globally to boost revenues, according to co-founder Reed Hastings, as the California-headquartered streaming giant lost 200,000 subscribers world over during January-March 2022 and expects to lose another 2 million subscribers in the April-June quarter.
This comes after the management had earlier said it would add 2.5 million subscribers in the January-March quarter. After seeing peak growth during the pandemic when viewers were confined to their homes, the company now said in its letter to its shareholders that “The big COVID boost to streaming obscured the picture until recently”, referring to how stiff competition from entertainment companies launching their own streaming services as well the as the practice of password-sharing by subscribers have stalled their growth.
“We're working on how to monetise sharing. We've been thinking about that for a couple of years. But when we were growing fast, it wasn't the high priority to work on. And now, we're working super hard on it,” said Hastings, also the Chairman, President & Co-CEO, at the post-result analyst call on Tuesday evening local time.
He reasoned that over 100 million households already view Netflix. “They love the service. We just got to get paid at some degree for them.”
It is common knowledge that users share their streaming account credentials to avoid paying for the service. Netflix sees “a tremendous opportunity” in this group as a way of boosting their revenues.
“So, if you've got a sister, let's say, that's living in a different city, you want to share Netflix with her, that's great. We're not trying to shut down that sharing, but we're going to ask you to pay a bit more to be able to share with her and so that she gets the benefit and the value of the service, but we also get the revenue associated with that viewing,” said COO & Chief Product Officer Gregory Peters.
The management, however, expects the revenue boost to show up in the form of increased ARM (average revenue per member) and engagement as opposed to an increase in subscriber count. The sub-accounts will not count as subscribers, the team clarified. “So, you should expect that member numbers or subscriber numbers are sort of less relevant over time because these -- it may very likely show up in ARM,” said CFO Spencer Neumann.
Last month, Netflix announced that it was testing a new feature in Chile, Costa Rica and Peru to allow primary account holders to add up to two users outside their households for a small fee. Now, after a year or so of light test launches, the team said it expects another year or so of iterations before it can start monetising account-sharing globally.
Meanwhile, Netflix is also considering launching an ad-supported low-cost version after staunchly remaining ad-free to retain its simplicity of use among a sea of ‘freemium’ streaming platforms, which offer some ad-supported content for free, while pricing the ad-free ones.
“Those who have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I'm a fan of that, I'm a bigger fan of consumer choice. And allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense,” said Hastings.
It will take Netflix a year or two to figure it out, he said, adding that there might not be a test pilot involved given that the model is already working well for rivals Hulu, Disney and HBO. “But again, it would be a plan layer, like it is at Hulu. So, if you still want the ad-free option, you'll be able to have that as a consumer. And if you would rather pay a lower price and you're ad-tolerant, that's also -- we're going to cater to you also,” said Hastings.
Netflix’s revenue rose from $7.7 billion as of December 2021 to to $7.9 billion as of March 31, 2022. Its net income fell to $1.6 billion as of March 31, 2022 from $1.7 billion a year ago.
Also read: Netflix explains why it lost subscribers for the first time in a decade
Also read: Netflix is rolling out another way to rate content and curate your homepage better