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Netflix warns of global crackdown on password sharing to stabilize growth
By Arghyadeep Dutta - Apr 20, 2022, 08:53 PM ET
Last Updated - Jun 23, 2024, 11:07 PM EDT
Netflix Inc (NASDAQ: NFLX), the world’s largest video streaming company, warned that it would start cracking down on password sharing worldwide. The company's aim is to end the rampant practice of borrowing a family member’s or friend’s login information at a time when the company is losing paid subscriber
• Over 100 million households globally share Netflix passwords, including 30 million from US and Canada
• Shares plunged nearly 40% after reporting drop in subscribers for the first time in 10 years
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Netflix Inc (NASDAQ: NFLX), the world’s largest video streaming company, warned that it would start cracking down on password sharing worldwide. The company's aim is to end the rampant practice of borrowing a family member’s or friend’s login information at a time when the company is losing paid subscriber.
The California-based company estimated that over 100 million households worldwide use a shared password, and more than 30 million of those are from the US and Canada.
In its quarterly shareholder letter, Netflix acknowledged that it has purposefully allowed out-of-home password sharing to get users hooked on the service.
However, with rivals like Disney, Apple TV+, Amazon Prime, Warner Bros Discovery, Paramount Global, and NBCUniversal eating into its growth, Netflix said it wants households that are sharing passwords to start paying.
“Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds,” Netflix said in the letter.
“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.”
Losing paid subscribers
In its first-quarter earnings report, Netflix said the company had lost 200,000 paid subscribers between January and March — the first time in over a decade.
The company also forecasted to lose 2 million more subscribers in the second quarter.
Netflix benefited from COVID-19 lockdowns, with more people seeking out home entertainment. However, people are spending less time on digital platforms as vaccines rolled out and restrictions eased in recent months.
Shares of the company plunged nearly 40% on Wednesday morning after the company reported its first drop in subscribers in a decade in its first-quarter earnings, resulting in a wave of downgrades from Wall Street analysts on fears over long-term growth potential.
Although the streaming giant didn’t outline a concrete global strategy yet, it suggested that changes could come as early as 2023.
Picture Credit: GQ
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