Proactive Investors - Netflix Inc (NASDAQ:NFLX) is delaying its crackdown on account sharing in the US and other countries after a “cancel reaction” seen after it was launched in markets including Canada and Spain.
The video streaming giant, which last night reported a lower number of new subscribers than forecast for the first quarter but higher earnings, is looking to roll out its “paid sharing” service in order to reduce the number of accounts that share their paid service for free with people outside their household.
New rules will begin in the US, UK and other countries during the second quarter to June, it said, which is expected to see member numbers shrink “modestly” in the short term but recover over time.
But the move was always expected to hit subscriptions and revenues in the short term.
The company said in a letter that “paid sharing”, where customers can share their account for a fee, saw the “cancel reaction in each market when we announce the news, which impacts near term member growth near-term”.
But it said this quickly led to a rebound and higher revenue, with Canada, for example, now seeing a paid subscriber base higher than before the launch of paid sharing.
“As borrowers start to activate their own accounts and existing members add 'extra member' accounts, we see increased acquisition and revenue,” it explained.
There are an estimated 100mln Netflix account holders around the world that unofficially share with friends and extended family, of which analysts at Morgan Stanley (NYSE:NYSE:MS) calculate up to 30% could be converted to paying subscribers.
Paid sharing is part of two new measures the company announced after unveiling its first fall in subscribers this time last year, with the other scheme being an advertising-supported option, which launched in November.
It said it was delaying the wider launch of paid sharing to the US and three other markets from the first quarter to the second, which would shift “some of the membership growth and revenue benefit” from the second quarter to the third. This could also cause engagement with Netflix’s service to shrink “modestly” in the short term, it said, although it expected that would recover over time. Despite the rollout delays, Netflix said it was confident it could hit its full-year targets, adding it was “pleased” with the recent paid-sharing launches.