Netflix: Password

After a delay, Netflix’s password-sharing crackdown begins this quarter in the US.

In a Tuesday letter to investors(Opens in a new window), Netflix said it's "pleased with the results" of an earlier rollout in four countries," so it's "planning on a broad rollout, including in the US, in Q2."

The company previously said it would start cracking down on password-sharing more broadly in the first quarter. But the streaming giant decided to only impose the restrictions in Canada and a few other markets including New Zealand, Spain, and Portugal.

The crackdown sparked backlash from users in those countries, and prompted some to even cancel their subscriptions. Even so, Netflix says results in Canada, New Zealand, Spain, and Portugal "strengthen[ed] our confidence that we have the right approach.”

Netflix conceded that some subscribers did cancel their subscriptions in the affected markets, but it also saw an influx of other users signing up for Netflix’s paid options.

“For example, in Canada, which we believe is a reliable predictor for the US, our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the US,” Netflix says.

Hence, the company is hopeful the crackdown will translate to increased revenue from Netflix’s various subscription plans. This includes paid sharing, which allows an existing subscriber to let someone outside their household stream via their Netflix account if they pay more.

To reach other users on a budget, Netflix created an ad-supported tier, which costs $6.99 per month, making it the cheapest plan available.

That all said, Netflix says there’s still a chance the broad crackdown causes many users to bail, which could affect its revenues. Still, it added: “Longer term, paid sharing will ensure a bigger revenue base from which we can grow as we improve our service.”

In Q1, Netflix reached 232.5 million paid subscribers, up from 230.7 million in the previous quarter. However, user growth in North America has stagnated over the past year.

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