• by Karlene Lukovitz  @KLmarketdaily, May 17, 2023

Netflix is warning UK telco partners about a potential backlash once the streamer launches its crackdown on free password sharing in the coming weeks.

Netflix has talked with bundling partners including Sky, Virgin Media and BT, encouraging them to prepare for the likelihood of a rush of calls, email and chat queries once it implements its paid sharing program, according to the Financial Times and other reports.

Paid sharing requires either that host accounts pay extra for adding users outside of their households, or that users establish their own accounts.

About 4 million, or one quarter, of the UK’s 15 million Netflix subscribers are currently using the service through password sharing, according to Matt Ross, managing director of TV/media industry research firm Digital i.

“There may initially be a bit of kneejerk reaction from some subscribers,” he told The Guardian.

In Spain, where the crackdown started in February, there has been a drop in viewing per account, he said, adding: “The question is what the overall impact will be on subscriber numbers in the long term.”

Spain’s level of password sharing is much higher, however, at 39% of Netflix subscribers.

Reflecting the streaming industry's shift from driving subscriber numbers at all costs to making a profit, Netflix launched its paid sharing program in Latin America last year and started to roll it out in Canada, New Zealand and Portugal, as well as Spain, in February. But it delayed the rollout to the U.S., UK and the rest of its markets from this year’s first quarter to the second quarter, saying it wanted to incorporate more learnings from its earlier experiences before pulling the trigger.

While Netflix has acknowledged that it had seen a “cancel reaction” in all markets where it has implemented the program, it has also insisted that subscribers will return, and that overall numbers will eventually rebound. In Canada, paid membership is now larger than it was prior to the program’s launch, according to the company.  

“Based on what we have seen in markets where Netflix has rolled out its plan so far there hasn’t been a huge amount of consternation among the subscriber base,” said Richard Broughton, an analyst at Ampere. “Netflix has had plenty of time to test this. It is not too uneconomical to upgrade to add more people, we don’t see large numbers of people furious about not being able to access Netflix for free."