Netflix Co-CEO Greg Peters says internal viewership data from before and after the implementation of paid password sharing shows the new policy has not turned off viewers, as some had initially predicted it would.

The company on Thursday reported a year-over-year jump of 9.3 million subscribers in the first quarter, in part due to the password policy that has put a price on sharing login credentials. The move has been a 180 from the free sharing ethos in the company’s start-up phase that eventually became a puckish tool for promotion. The new ad-supported tier, which costs less than paying for an extra account, has also benefited from the new password setup, helping Netflix to reach almost 270 million global subscribers.

Speaking on the company’s earnings call, Peters described internal data from “owner households,” meaning those not affected by the new policy. In the first quarter, he said, viewing by those subscribers was “steady” with the same period in 2023. “That’s a pretty good sign that our engagement is holding up, and it sort of cuts through the noise around paid sharing,” he said.

In 2021 and ’22, as the company was ramping up its efforts to force customers sharing passwords to pay for that privilege, some observers on Wall Street and in the tech sector predicted trouble. Some described it as a desperate measure taken at a time when the company was on its back foot, with subscriber levels dipping for the first time in a decade and a raft of well-funded new competitors in the market. Even the company’s execs said they would need to proceed with caution, lest they alienate customers and send churn rates spiking.

Peters acknowledged that in the aggregate, the policy would cause a near-term dip in viewing. “We’re essentially cutting off some viewers who were not payers and therefore we’re going to lose some viewing associated with that,” he explained. Still, “despite that impact and despite the general pressure from strong competition,” he continued, “we think our engagement remains healthy.”

Netflix execs eschew the term “crackdown” to describe the updated stance on passwords, instead characterizing it as an initiative aimed at helping it to continue spending on content and other subscriber benefits. Peters during the call described the password process as constantly evolving. “Like we do with all of our significant parts of our product experience, we’re constantly testing and iterating on it,” he said.

Peters and his colleagues were asked by one analyst about how much of a dent it had made in its original estimate that 100 million people were letting non-subscribers borrow their passwords. “Rather than thinking of specific cohorts or specific numbers, we really think about this as the development of more mechanisms, more eff ways to convert folks who are interacting with us,” he replied. Those interactions encompass not just “borrowers,” Peters said, but also “re-joiners” and those who have never before had a subscription.

“We want to find the right call to action, the right offer, the right nudge at the right time to get them to convert,” he said. “We still see opportunities to improve this process. We’ve got line of sight on several improvements to this value translation mechanism that we expect will deliver and contribute to business growth for the next several quarters to come.”

Doing a better job of interfacing with new, returning and existing subscribers, Peters said, “will allow us to effectively get more of the 500 million-plus smart TV households to sign up.” Engagement, he said, also has “plenty of room to run,” he added, with Netflix accounting for less than 10% of total TV time in many of its key markets.



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