Netflix password sharing crackdown expected to boost subscriber base in India

Experts caution that the quantum of growth may not be as high as global markets and it may also lead to piracy concerns.

After cracking down on password sharing in over 100 countries, Netflix, on Thursday, announced that it will be introducing it in India. Starting today only members within a household will be granted access to a single Netflix account.

"Beginning today, we’ll start to address account sharing between households in almost all of our remaining countries," the company announced in its Q2 results.

In 2022, Netflix began its crackdown on password sharing with Latin America. In February, it started to roll out the new policy in Canada, New Zealand, Portugal and Spain. In May it was extended to over 100 countries, including the US and UK. These countries represented more than 80% of its revenue base.

In a letter to its shareholders, the streamer declared the policy successful stating that the revenue in each region is now higher than pre-launch, with sign-ups already exceeding cancellations. It added 5.9 million paid members in the second quarter of 2023, as compared to losing nearly one million members in the same quarter last year. Its revenue rose to $8.2 billion, a 3% rise from the same period last year.

"The cancel reaction was low and while we’re still in the early stages of monetisation, we’re seeing healthy conversion of borrower households into full paying Netflix memberships as well as the uptake of our extra member feature. We are revenue and paid membership positive vs. prior to the launch of paid sharing across every region in our latest launch," it stated.

The streamer is now addressing account sharing between households in almost all its remaining countries, including India, Indonesia, Croatia and Kenya. However, unlike for other countries, the streamer is not rolling out the paid sharing option in these markets. The feature allows users to pay an extra fee to continue sharing their Netflix account with people they don’t live with.

The streamer explains that they had recently cut prices in India and a few other markets, and the penetration is still relatively low, giving the company "plenty of runway without creating additional complexity".

Industry experts suggest that the policy will do well for the platform in the Indian market as well.

While hailing it as a positive move, Karan Taurani, senior vice president, Elara Capital, says, "However, the quantum of growth in subscribers may not be as high in India as compared to the global markets, which are better in terms of adoption and digital payments ecosystem. This is primarily because India is a price sensitive market. While many customers may take new subscribers, there may be many others who may unsubscribe from the platform."

Uday Sodhi, senior partner, Kurate Digital Consulting, believes that it is the right way to go for the platform as it plugs the revenue leakage.

"In the short run some viewers who were sharing access might drop off and might take their own time to buy a new account. However, in the long run the number of subscribers will rise significantly," he says.

Divya Dixit, business strategy and growth advisor for startups, says, this could affect the revenue either ways. It could generate volumes in small plan consumers which may make for a bigger revenue number and larger MAUs when added up. But it could also have an adverse effect wherein the ARPU may dip and the overall add up of volumes may still not amount to substantial revenue increase.

"One of the reasons for any OTT platform's success in India is price-friendly packets and subscription models. It is difficult to predict the outcome at the moment. It could either result in people opting for cheaper plans, which are more economical and price effective, but tear the blended ARPU down. On the other hand, it could also result in people opting to use other OTT platforms due to their wide variety of free content such as JioCinema. As the competition in the market gets tougher, there are various other platforms which are ready to offer cheaper plans for a wide range of their content," she says.

"While the metro consumers might opt for individual plans, people in other cities might opt out of the platform too. As password sharing is allowed on other platforms, people would prefer to use the platform which fits easily in their budget and has equally great variety of content," she adds.

Netflix currently has four subscription plans in India- the mobile-only plan at Rs 149 per month, the Basic plan at Rs 199 per month, the Standard Plan at Rs 499 per month and the Premium plan at Rs 649 per month.

With the new policy kicking in, more users are expected to opt for the mobile-only plan. With most OTT consumers watching content on their mobile devices, India is known to be a mobile-first country.

"Currently, Netflix has a strong presence in urban metros. The paid subscriber base for OTT in India is close to 200 million households. Within that 25-30 million households are high income. Netflix has close to 40-50% penetration in high income households. Currently it offers premium content appealing to the high income individuals. Now to move lower in the value ecosystem they will need to offer more massy content," Taurani says.

However, Netflix remains one of the most expensive streaming platforms in India. With no paid sharing option available, it raises concerns of piracy. "India's pricing is already at a steep discount so it may not be possible to take the pricing lower. So some customers will resort to piracy," he adds.

Dixit also believes that this rule could cause an increase in piracy, "with people using tools like VPNs and other extensions on their browser to avail the facility."

However, Sodhi dismisses these concerns saying, "Streaming is now an established form of content consumption. At less than the price of a movie ticket and popcorn, one can get a monthly OTT subscription. Why would anyone opt for pirated content?"

In December 2021, Netflix had reduced the prices of its service in India. In April 2023, it said that the move had helped the company grow engagement in India by nearly 30 percent year-on-year (YoY). Meanwhile the revenue growth increased to 24 percent in 2022 versus 19 percent in 2021.