Netflix crackdown on password sharing to begin soon

Squid Game is the most popular series in Netflix's history

Netflix's long promised crackdown on password sharing will begin in the coming months, the firm says.

The plan means members who want to share accounts with people outside of their household will face an extra fee.

The move, aimed at boosting subscribers, has been trialled in some countries but not yet rolled out in the UK or US.

It comes as the company announced it would shut down the DVD rental service that launched the firm 25 years ago.

Netflix has been on the hunt for ways to re-ignite growth, which has slowed sharply as competition heats up, households grapple with rising costs and it reaches what analysts see as saturation point in some of its biggest markets.

It shed more than one million subscribers in the first six months of 2022.

Though it more than made up those losses later in the year, helped by subscriber gains in Asia, the decline jolted the firm to make changes.

The company introduced a less expensive streaming option with advertisements last year and cut prices in 116 countries in the three months to March in an effort to entice more people to sign-up for its service.

It had also been preparing for a wide expansion of its paid sharing programme, which it started trialling in some countries last year, adding more in February.

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In a letter to investors on Tuesday, Netflix said it would introduce paid sharing widely, including in the US, by July - a few months later than expected, as it tweaks the offering in response to feedback, like making sure users can access their accounts easily while travelling.

The company declined to confirm when UK users should expect to see changes, but noted that the vast majority of its big markets would be included in the next phase of the rollout.

"We're pleased with the most recent launches," the company said in the letter. "We learn more with each rollout and we've incorporated the latest learnings which we think will lead to even better results."

Netflix has estimated that more than 100 million households share passwords in breach of its official rules - an audience it hopes to tap to drive revenue growth.

In Canada, adding a "sub account" costs an extra CAD$7.99 (£4.80; $5.95) a month on top of the standard or premium monthly membership cost. Paid sharing costs 3.99 euros (£3.50; $4.40) in Portugal, and 5.99 euros (£5.27; $6.56) in Spain.

The company warned investors to expect some cancellations as it expands the programme but said: "Longer term, paid sharing will ensure a bigger revenue base from which we can grow as we improve our service".

In Canada, where the changes were introduced in February, its paid membership base is now larger than it was before the changes and revenue growth has accelerated, it said.

Streaming wars

California-based Netflix has come a long way since it started shipping DVDs to customers in the US in 1998.

It launched its streaming service in 2007 and is now a global behemoth with more than 232 million subscribers around the world.

In the investor letter, Netflix described the DVD service, which will shut down in September, as the "booster rocket that got streaming to a leading position".

"We feel so privileged to have been able to share movie nights with our DVD members for so long, so proud of what our employees achieved and excited to continue pleasing entertainment fans for many more decades to come," the company said.

But despite its early lead, Netflix's dominance of the streaming industry has started to erode as competition has intensified.

The company added just 1.75 million paid memberships in the January to March period. It also forecast weaker growth in the months ahead than many analysts had expected.

Paolo Pescatore, analyst at PP Foresight, called the performance "mixed".

"The quarter raises more questions than answers," he said.

Netflix said overall revenue was up 3.7% year-on-year to $8.1bn. It reported $1.3bn in profit, down from nearly $1.6bn last year.

Paul Verna, principal analyst at Insider Intelligence said the results showed Netflix's paid password sharing program and ads business had hit "early speed bumps and even in the best-case scenario, will take a long time to scale [up]".

"These are worrying signs for a business that, despite still being a market leader, is struggling to get its mojo back," he said.