Netflix to roll out paid sharing initiatives in Jan quarter | Mint
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Business News/ Industry / Media/  Netflix to roll out paid sharing initiatives in Jan quarter
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Netflix to roll out paid sharing initiatives in Jan quarter

Paid net additions for Netflix stood at 7.7 million globally in the December quarter of 2022 versus 8.3 million in the same period in 2021

Netflix doesn't disclose India-specific numbers separately (AFP)Premium
Netflix doesn't disclose India-specific numbers separately (AFP)

American streaming platform Netflix that finished 2022 with 231 million paid subscriptions said it is looking to roll out paid sharing initiatives later this quarter. 

The OTT platform launched a lower-priced, ad-supported tier in November which is available in 12 markets including the US, Australia, Brazil, Britain, Canada, France, Germany, Italy, Japan, South Korea, Mexico and Spain.

Paid net additions for Netflix stood at 7.7 million globally in the December quarter of 2022 versus 8.3 million in the same period in 2021. In the Asia and Pacific region, Netflix added 1.8 million paid members in the December quarter, lower than the 2.58 million added in the same period a year ago. The streamer doesn't disclose India-specific numbers separately.

The fourth quarter saw year-over-year revenue growth of 2%, driven by a 4% increase in average paid memberships. ARM (average revenue per member) declined 2% year-over-year, but grew 5% on a foreign exchange neutral basis, Netflix said. Operating income of $550 million in Q4 was down versus $632 million in Q4 ‘21.

However, the company is likely to put in place curbs on password-sharing, which may add some extra subscribers.

“We expect to roll out paid sharing more broadly later in Q1’23. We anticipate that this will result in a very different quarterly paid net adds pattern in 2023, with paid net adds likely to be greater in Q2’23 than in Q1’23. From our experience in Latin America, we expect some cancel reaction in each market when we roll out paid sharing, which impacts near-term member growth. But as borrower households begin to activate their own standalone accounts and extra member accounts are added, we expect to see improved overall revenue, which is our goal with all plan and pricing changes" the company said in a letter to shareholders.

Meanwhile, co-founder Reed Hastings, who previously gave up the sole CEO title to share it with the then chief content officer Ted Sarandos, is relinquishing his co-CEO title as well, Netflix said as part of its earnings release. Sarandos and chief product officer Greg Peters will become co-CEOs with Hastings serving as executive chairman, the company said Friday.

In addition to these changes, Bela Bajaria, formerly head of global TV, has been appointed chief content officer and Scott Stuber is named chairman of Netflix film.

“As we roll out paid sharing, members in many countries will have the option to pay extra if they want to share Netflix with people they don’t live with. As is the case today, all members will be able to watch while traveling, whether on a TV or mobile device," Netflix said.

The ad-supported plans introduced last November give the company the opportunity to present a lower consumer face pricing in specific countries, Peters said during the earnings call. “Part of it is casual sharing, which is people could pay, but they don’t need to, and so they are borrowing somebody’s account. And so our job is to give them a little bit of a nudge and to create features that make transitioning to their own account easy and simple. We have a profile export feature, which allows you to take your viewing history and all the recommendations with you," Peters said.

Besides, there will be a range of account management features that the platform will roll out later this quarter. “This will not be a universally popular move, so we will see a bit of a cancel reaction to that. We think of this as similar to what we see when we raise prices. We get some increased churn associated with that for a period of time. But then generally, we will see folks come on as new subscribers, essentially borrowers creating their accounts or incremental monetization through the extra members that will happen shortly thereafter," Peters said.

The company said it is seeing that engagement from ad plan users is comparable to similar users on its non-ad plans. “That’s a really promising indication. Further, we are seeing take rate and growth on that ads plan is solid..due to incremental subscribers coming into the service, because we have a lower price point," Peters said during an earnings call. In a letter to shareholders, the company said it has seen very little switching (of users to the ad tier) from other plans. “Our ad-supported plan has strong unit economics, at minimum, in-line with or better than the comparable ad-free plan and will generate incremental revenue and profit, though the impact on 2023 will be modest given that this will build slowly over time," the letter added.

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ABOUT THE AUTHOR
Lata Jha
Lata Jha covers media and entertainment for Mint. She focuses on the film, television, video and audio streaming businesses. She is a graduate of the Columbia School of Journalism. She can be found at the movies, when not writing about them.
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Published: 20 Jan 2023, 02:44 PM IST
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