In a detailed letter to shareholders last month, Netflix explained the plans for a broad rollout, including the U.S., as one that will grow the paid membership base, therefore increasing profits, rather than reduce these metrics.
Netflix began sending an email to account holders with a membership that is being shared with someone outside of their household. In the email, the company explains that users outside the member's household will have to either get their profile transferred to a new paid membership, or the account holder can have an extra $7.99 added to their monthly bill to continue sharing.
Paid sharing was rolled out in the first quarter of 2023 in Canada, New Zealand, Spain, and Portugal. "In Canada, which we believe is a reliable predictor for the U.S., 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 U.S.," the letter read.
When a paying member transfers someone's profile to a new membership, the person outside the account holder's household will have to pay for their own subscription to be able to keep their watch history and list, as well as all other pertinent information from their profile.
This rollout comes after paid sharing tests conducted in Latin America in 2022 were rendered successful by Netflix, though reports claim the company lost nearly one million subscribers as a result.
Netflix explains it saw initial cancel reactions in each of the three countries it tested the paid sharing program when the news were announced. But then it saw increased acquisition and revenue as the "borrowers" activated their own paid accounts and existing members began adding extra shared accounts.
"Longer term, paid sharing will ensure a bigger revenue base from which we can grow as we improve our service," Netflix adds.
Netflix reports current account sharing has reached over 100 million households among its subscribers. "Widespread account sharing undermines our ability to invest in and improve Netflix for our paying members, as well as build our business," the company shared in the letter.
The original plan was to roll out the paid sharing program broadly in the first quarter of 2023, but the company decided to delay this initiative. "We're pleased with the most recent launches of paid sharing, and while we could have launched broadly in Q1, we found opportunities to improve the experience for members," the letter reads.
Now that Netflix rolled out paid-sharing to accounts in the U.S., you'll have to set a primary location for your account, and any other people using your Netflix subscription outside this location will lose access, unless you choose to pay for the extra members. You'll still be able to log into your account on your phone or tablet, or a new TV at a vacation rental or hotel.
Changes to the Netflix ad plan
The streaming service company also announced some changes to its new ad plan back in April, which lets users pay a lower price for a Netflix subscription that includes ads. In the letter, the company reports its average revenue per member (ARM) for accounts with ads, including the subscription fee and the ad revenue, is greater than that of its standard plan.
Seeing the positive revenue and minimal switching to an ad-free subscription, Netflix is improving the experience for ads plan to include 1080p-resolution video quality, up from 720p, and two concurrent streams.