Netflix’s recent decision to crack down on password sharing, or as the company refers to it, “paid sharing,” is expected to have a significant impact on its long-term growth. In a recent video call addressing Wall Street concerns, Greg Peters, the co-CEO of Netflix, emphasized that this move, along with the streamer’s ads work, will help translate the platform’s value into revenue growth and increase the conversion of its addressable market in the years ahead.
Peters highlights that the crackdown on password sharing serves as an effective engine to foster revenue growth and goes hand in hand with the company’s already healthy organic growth. Netflix’s success has been driven by its vast content library, including popular TV series, movies, games, and now even live events through its partnership with WWE. The paid sharing product work has been successfully integrated into the platform and is constantly being improved to enhance the overall user experience.
Analysts have expressed concerns about the potential plateauing of subscriber and average revenue per membership (ARM) benefits resulting from paid sharing by 2024. However, Peters assures that Netflix has taken these concerns into account and launched the feature strategically. Paid sharing was initially tested in Canada, New Zealand, Spain, and Portugal before being introduced in the United States in the second quarter of 2023. The company believes it has successfully addressed account sharing and has implemented features such as Transfer Profile and Extra Member to ensure that users pay for the services they enjoy.
Rather than being a temporary solution, paid sharing is now an integral part of Netflix’s business model. The company sees it as a means to expand its user base and penetrate the near-term addressable market of approximately 500 million connected TV households (excluding China and Russia). As broadband penetration continues to rise, Netflix expects this market to expand further, providing opportunities for sustained growth in the future.
Netflix’s recent financial report revealed solid numbers and a significant increase in subscribers. The implementation of paid sharing and the introduction of a new advertising tier have played a role in cementing Netflix’s position as the leading streaming platform. While the streaming industry has become more competitive and challenging in the post-Covid landscape, Netflix remains at the forefront, thanks to the strategic decisions made by the co-CEOs Greg Peters and Ted Sarandos.
Netflix’s crackdown on password sharing, branded as “paid sharing,” is expected to drive the company’s growth for years to come. By addressing account sharing and integrating the paid sharing feature into its platform, Netflix aims to translate its value into revenue growth and expand its user base. With a focus on organic growth and the implementation of innovative features, such as Transfer Profile and Extra Member, Netflix is well-positioned to capitalize on the increasing penetration of broadband and the expanding market of connected TV households. Despite the challenges posed by the evolving streaming landscape, Netflix’s strong financial results and ongoing commitment to improving its product experience highlight the company’s determination to maintain its position as the industry leader.