Netflix’s Password Sharing Crackdown Could Yield New Subscribers

Netflix updated investors on its ad-tier trends and its plans to charge for sharing passwords.

Netflix logo appears next to a password box.
Password sharing fees are coming. NurPhoto via Getty Images

Netflix shareholders have been waiting for updates on the ad-supported tier’s business impact and the company’s plan for password sharing fees, and with Netflix reporting earnings Jan. 19, they finally have some answers.

Netflix spent a large part of 2022 prepping its plan for password sharing fees. In April, it announced new charges for households sharing passwords with others, after estimating more than 100 million homes were using the service without paying for it. At the time, Netflix had 222 million paying customers. It has been testing the fee at $2.99 per month and is expected to launch it in the coming months.

“This will not be a universally popular move,” and Netflix expects some users to cancel their subscriptions because of it, said Greg Peters, who replaced Reed Hastings as co-CEO alongside Ted Sarandos as of Jan. 19. But it might also boost the total subscriber numbers, according to Horowitz Research, a New York-based research firm.

More than 70 percent of Netflix users using someone else’s login would be willing to pay the full price if password sharing stopped being possible, according to a Horowitz report published Jan. 17. Netflix had the highest percentage of users willing to do so. By comparison, half of HBO Max, Amazon Prime Video and Disney+ password sharers would pay full price.

The company didn’t disclose subscriber numbers or revenue attributable to its ad tier, but executives briefed shareholders on trends they’re seeing during the earnings call. User engagement on the ad-supported plan is similar to engagement on Netflix’s other plans, said Peters. Netflix isn’t seeing many users downgrade from its higher priced plans to its ad tier, and new subscribers are joining incrementally, which Peters attributed to the tier’s comparatively low price point. Its ad plan costs $6.99 per month in the U.S., which is cheaper than many of its competitors including Hulu and HBO Max. 

In the coming years, Netflix expects the ad plan to account for at least 10 percent of its revenue, Spencer Neumann, chief financial officer, said on the call. In the report, Netflix said it will only have a “modest” impact in 2023. Netflix’s Password Sharing Crackdown Could Yield New Subscribers