• by Karlene Lukovitz  @KLmarketdaily, October 19, 2023

Netflix’s crackdown on free, shared accounts, which contributed to solid subscriber and revenue gains in its third quarter, is still very much in progress, according to the company.

Netflix’s letter to shareholders for its Q3 results, reported on Wednesday, states that the shift away from allowing free account sharing “has now successfully taken action in every region in which we operate,” and is rolling out as planned.

But in an interview with investors following the results release, Netflix Co-CEO Greg Peters explained that millions of subscribers globally have yet to be affected by the policy shift.

Netflix is “incredibly pleased” with the growth driven by requiring that households pay a fee to share their accounts, or that former “borrowers” start their own accounts, and expects to continue to realize substantive incremental gains in subscribers over the next several quarters from the policy’s continuing rollout, Peters confirmed.

The cancel rate in response to the policy has been even lower than expected, and those converting to their own accounts are showing “healthy” retention, according to the letter to investors. As a result, Netflix is “revenue-positive” in every region, when accounting for additional spin-off accounts and extra members, churn and changes to its plan mix.

But Netflix always planned to accomplish the transition in stages, by tailoring the timing and approach of the conversion efforts to different markets and customer segments and honing those as it gathers more experience and data and improves the model, according to Peters.

“We want to show up with the right product at the right moment” to maximize conversions and long-term revenue, he said.

As a result, “a number of borrower cohorts” have yet to be approached to convert, he said.

Further, there are many “borrowers” that Netflix will not attempt to convert in the next several quarters, Peters added.

“We have many hundreds of millions of qualified households out there,” he said. “There are smart TV households that we want to win over the next several years… We’ve got to go after them in the same way we go after people who have never signed up for Netflix, which is having an incredible content offering and incredible value, and get them so excited that they just have to sign up.”