Netflix has signalled that it may tighten down on families sharing passwords as it tries to bolster its subscriber base following a steep drop in numbers.
As a result of tough competition from rivals, the number of homes utilising the streaming service declined by 200,000 in the first three months of the year. It also suffered a setback after hiking rates in various countries and withdrawing from Russia. Netflix warned shareholders in the three months leading up to July that another two million users were on the verge of cancelling their subscriptions.
Following the release of its first-quarter results on Tuesday, the business warned shareholders that “our sales growth has slowed dramatically.” “Competition, along with our very high household penetration – especially when considering the large number of houses with shared accounts – is generating revenue growth challenges.”
According to the streaming behemoth, more than 100 million homes are breaking corporate regulations by swapping passwords.
Reed Hastings, the company’s CEO, has previously described the practise as “something you have to learn to live with,” with much of it being “legitimate” among family members. According to Netflix, account sharing has undoubtedly boosted its growth by expanding the number of people who utilise the service. However, Mr Hastings stated on Tuesday that it was making it difficult to attract new subscribers in some nations.
“And now we are devoting a lot of time and effort to it.” He made the investors aware of the situation. According to the corporation, payment mechanisms being tried in Latin America to deter password sharing might be expanded to other countries.
Account-holders in Chile, Costa Rica, and Peru have had to pay to add user accounts for persons outside their homes since last month (the company currently allows people who live together to share their Netflix accounts). On top of their monthly subscription, users may add up to two more profiles for $2-$3 (£1.53-£2.30) apiece.
Netflix said it was looking for a “customer-centric” solution, but did not specify how it would enforce the regulation.
Netflix’s chief product officer, Greg Peters, explained, “The fundamental approach we have is asking our users to pay a little bit extra to share the service outside of their homes.” The proposal, according to Dominic Sunnebo, an analyst at Kantar, might backfire at a time when customers are seeking ways to save money.
“Anti-password-sharing initiatives that act too quickly and violently risk alienating a future audience – many consumers who password-share outside their homes are unaware they are violating their subscription conditions.” As a result of its pullout from Russia in March in response to the Ukraine war, Netflix has lost 700,000 subscribers.
Another 600,000 individuals in the United States and Canada stopped using its service when it raised pricing in January.
All of the company’s US plans have been upped in price, with a basic plan rising from $9 to $10 per month and a standard plan rising from $14 to $15.50. Basic and standard plans in the United Kingdom have both been raised by £1 per month to £6.99 and £10.99, respectively.
Despite the cancellations, Netflix stated that price increases will bring in more revenue. However, economists believe that as the cost of living grows, the growing cost of streaming services is putting a strain on households.
In the first three months of this year, families in the United Kingdom cancelled more than 1.5 million streaming subscriptions, with 38% claiming they wanted to save money.
