'Gongyu is Love'... Shift in Stance Due to Profitability Decline
Paid Account Sharing Intensifies in Q2
78.5% of Koreans "Use Because of Account Sharing"
Netflix saw a decrease of 1 million users in Spain, where it first introduced a paid account sharing system in February. Netflix unveiled the paid account sharing measure at the end of the first quarter to increase profitability but postponed its implementation to the second quarter due to consumer backlash. Although paid account sharing seems imminent in Korea as well, user reactions are negative.
According to market research firm Kantar, Netflix users in Spain decreased by 1 million in the first quarter, about three times the decline compared to the previous quarter. In February, Netflix began implementing paid account sharing in four countries: Spain, New Zealand, Canada, and Portugal. The fees vary by country, but in Spain, users must pay an additional 5.99 euros (about 8,811 won) per month if they share their account with someone outside their family. Among users who canceled their Netflix subscriptions, two-thirds had shared their accounts with others.
Among Spanish users who did not cancel their subscriptions, 10% said they plan to cancel in the second quarter. Dominic Sunnebo, Global Insights Director at Kantar Worldpanel, stated, "The sharp decline in users is clearly due to the crackdown on account sharing," adding, "Even if most are not paid subscribers, a loss of 1 million subscribers will impact Netflix in terms of word-of-mouth effects for its content."
Netflix previously tolerated account sharing among subscribers with the slogan "Password sharing is love," but changed its stance as profitability worsened. It piloted the paid account sharing system in Latin America last year and expanded it to Spain, New Zealand, Canada, and Portugal in February this year. The company originally planned to fully launch paid account sharing in the U.S. and other countries at the end of the first quarter but postponed it to the second quarter.
Netflix is also expected to implement paid account sharing in Korea. Earlier this year, it announced on its website that "Netflix accounts are for people living together in the same household," and in October last year, it introduced a 'profile transfer feature' that allows users to move their viewing history when creating a new account. While paid account sharing is essential to secure profitability for the ad-supported Basic plan launched in October last year, Netflix seems hesitant to implement it quickly as it risks losing subscribers. The Premium plan, which allows up to four simultaneous streams and costs 17,000 won, can be shared among four people, making it only 4,250 won per person. In contrast, the ad-supported Basic plan costs 5,500 won per person, 1,250 won more, and includes 4 to 5 minutes of ads per hour. The so-called '4-person pods,' where four people gather to split the fee on online communities or sharing platforms, are active, but if left unchecked, users will not switch to the ad-supported Basic plan.
However, if paid account sharing measures are implemented, Korea is expected to face backlash comparable to Spain. Last month, the Korea Press Foundation conducted a survey of 1,000 Netflix users aged 20 to 50 and found that 72.7% responded negatively to Netflix introducing a paid account sharing policy. Additionally, 78.5% of users said that the ability to share accounts influences their decision to use Netflix.
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