Netflix Suggests A Global Password Sharing Crackdown Is Coming
Netflix, the world's largest streaming video company, warned a global crackdown on password sharing is coming soon. The company said it estimates more than 30 million U.S. and Canadian households are using a shared password to access its content. They estimated more than 100 million additional households were likely using a shared password worldwide.
During its quarterly shareholder letter, the streaming giant acknowledged it has purposefully allowed generous out-of-home password sharing because it helped get users hooked on the service. Although, with accumulating competition from Disney, Warner Bros. Discovery, Paramount Global, NBCUniversal, Apple TV+ and streamers that feature the medium, the platform said it wants the millions of households sharing passwords to start paying.
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"Our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds," the letter from Netflix expressed. "Account sharing as a percentage of our paying membership hasn't changed much over the years, but, coupled with the first factor, means it's harder to grow membership in many markets - an issue that was obscured by our COVID growth."
Netflix also reported a loss of 200,000 paid subscribers in the first quarter ended March 31 - the first time in more than 10 years that the company has lost subscribers during a quarter. They projected it will lose 2 million more subscribers in the second quarter.
The company has already begun testing different ways to curb password sharing in Chile, Costa Rica, and Peru. Executives said on the company's earnings call last Tuesday that it could expand the model it had laid out in those countries, charging extra to accounts that share passwords out of home.
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Presently, the streaming giant currently has 222 million subscribers worldwide. It received a booming boost during the pandemic, but that customer surge has now turned negative as Covid-19 quarantines have been lifted.
Netflix has continued implementing the password sharing feature because, in the words of co-founder and co-CEO Reed Hastings, the company was "doing fine" without taking any strong actions.
"Sharing likely helped fuel our growth by getting more people using and enjoying Netflix," the streaming platform conveyed in its shareholder note. "And we've always tried to make sharing within a member's household easy, with features like profiles and multiple streams."