Netflix to charge $3 extra for account share, in bid to monetize subscriber base

BY CHARLES ABUEDE

Netflix, the worldwide streaming and video-on-demand company, plans to expand its test that charges members a higher price if they are engaged in account sharing with people outside their household, to global markets, including the U.S., in around a year’s time after it tested the feature in Chile, Costa Rica and Peru in March.

Netflix, at its first-quarter earnings call where it spoke on its subscriber losses, clarified it will need to continue to iterate on the feature for roughly a year or so, to make sure it gets the balance right in terms of how much extra to charge subscribers who have shared their Netflix account with other users outside their own household.

The streamer said that by asking members who are sharing their accounts to pay more, it hopes to strike the right balance between still permitting sharing to take place while also helping to bring in revenue from everyone who’s viewing and getting value from its service. The actual dollar and cents that “value” will translate to, of course, is yet to be determined, and it is likely to vary between markets.

Greg Peters, Netflix’s chief product officer, at the earnings call on Tuesday, explained that this solution doesn’t rely on location-based data, like GPS. Instead, it’s leveraging the same information it uses to provide its service today to its end users, including an IP address, device IDs and other information about devices signed into the Netflix account across the household, adding that through this method, Netflix can identify when there’s persistent sharing taking place outside a household.

“We just did the first big country tests, but it will take a while to work this out and to get that balance right. Frankly, we’ve been working on this for about almost two years… a little over a year ago, we started doing some light test launches that…informed our thinking and helped us build the mechanisms that we’re deploying now,” Greg said.

Per TechCrunch, at the moment, Netflix’s Standard and Premium subscribers in its handful of test markets are being offered the option to add “sub-accounts” to their service for people they don’t live with. Each sub-account will have its own profile and personalised recommendations — but they also have their own Netflix login and password. This sets them up to become established members with their own accounts in the future. If they choose to make that move, their viewing history, watch list (“My List”) and personalised recommendations will transfer over to their own account with their own billing information. With the member sharing their account now paying more, they may choose to push the freeloader off their account when the new charges kick in, the company explained.

Netflix also noted that the sub-accounts do not count as subscribers while they’re still engaged in account sharing with another household. Today, the streaming giant estimates that there are around 100 million households globally sharing their user accounts, and over 30 million of those are in the U.S. and Canada alone.

Meanwhile, sources have revealed that this is not the only way Netflix is planning to monetize its subscriber base as the company also said it will introduce an ad-supported plan.

The company also explained that the extra cost for non-household members is less expensive than a full Netflix account plan, but that it is also more than it previously cost to share someone’s Netflix account for free.

In its test markets, Netflix charged 2,380 CLP in Chile, $2.99 in Costa Rica and 7.9 PEN in Peru as an additional cost for non-household members.