Netflix freeloaders in Korea vow to ditch streamer after new policy

Netflix is changing its policy on sharing as it struggles to maintain profitability and growth, and many Koreans say they might drop the service as a result.

The graph shows the number of paid memberships of Netflix per year. [NETFLIX]

Netflix is changing its policy on sharing as it struggles to maintain profitability and growth, and many Koreans say they might drop the service as a result.

The company has long had a fairly liberal policy toward the sharing of login information, allowing customers to give their credentials to others so that many people can utilize one account.

No longer.

Netflix said in its letter to shareholders on Jan. 19 that it will start rolling out paid sharing more broadly towards the end of first quarter, charging additional fees if the account is shared with a user who is not a household member of the account owner.

The changes could hit Korea in the next few months.

Netflix distinguishes household and non-household members with log-in IP address and account activity.

Its paid sharing policy first began in Latin American countries of Chile, Costa Rica and Peru with an "add extra member" feature, in March 2022. Extra members are charged some 3700 won ($2.99) to share the account. Argentina, the Dominican Republic, El Salvador, Guatemala, and Honduras saw the account limit feature from Aug. 2022.

Netflix estimates that more than 100 million of its 231 million paid memberships are sharing their subscriptions.

The streamer, which tweeted "Loving is sharing a password" in 2017, implemented the turnaround as its profit dampened over the years.

In the first quarter of 2022, Netflix lost some 200,000 paid memberships on quarter. Its stock price plummeted 35.12 percent on the day of the quarterly earnings report.

"We expect some cancel reaction when we roll out paid sharing," Netflix wrote in its letter to shareholders, adding that earning should improve in the long term as freeloaders begin to activate their own accounts.

The reaction of Korea to the move could be particularly harsh.

In a survey by Korea Information Society Development Institute (KISDI) released Nov. 28, 2022, 42.5 percent of paid membership users said they will unsubscribe from the streaming service if Netflix begins paid sharing in Korea. Of those polled, 24.2 percent said they will pay the additional fee to continue sharing the account.

"Netflix may experience lower revenue as more users choose to unsubscribe under the paid sharing policy, because account sharing was a major attracting factor for subscription," the KISDI said in its analysis of the survey results.

Local service operators, such as Tving, Wavve and Coupang Play, are taking a wait-and-see strategy and are expecting some defectors as a result of the change.

Account sharing companies that receive commission by connecting those who wish to share accounts and balancing their subscription fees see Netflix's paid sharing as a favorable factor.

"Netflix is not banning account sharing — it's adding a paid membership," said a spokesperson for Pickle Plus, an account sharing company with more than 200,000 users. "Account sharers only have to share the additional fee."

"If paid sharing becomes a norm in the industry, even users who shared the account within their household may flow into account sharing platforms," said a source from Linkid, another account sharing company in Korea.

BY KIM KYUNG-MI, SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]