Netflix sees cracking down on password sharing as a way to improve its dim outlook
By Matt Collins Article may include affiliate links
After reporting it lost 200,000 subscribers in the first quarter of 2022, Netflix gave clear signs that it sees cracking down on password sharing as a way to reverse its fortunes.
The company reported April 19, 2022, that it has 221.6 million subscribers globally but says it will fall short of signing up 2.5 million new subscribers Wall Street had been expecting, sending the stock down in after-hours trading.
That was a net loss in overall subscriber count, down from 221.84 million at the end of 2021. This marks the first time in several years the service saw a loss in subscribers.
An estimated 700,000 subscribers were lost as a result of the streamer pulling out of Russia after its unprovoked attack on Ukraine.
Like most subscription services, Netflix works hard to not only sign up new customers but also keep existing customers paying, with the ideal situation that it retains most of its existing subscribers and adds a big chunk of new ones as well. The next best thing is often to attract enough new signups to offset cancellations.
To make things worse, the company warned investors it expects to lose another 2 million subscribers in the second quarter of 2022 — even with some of its biggest shows returning in that time period.
Going back farther, for the fourth quarter ending 2021, the company missed its own signup mark by about 300,000, adding 8.2 million accounts.
That said, the company still managed $607 million in profit, which was up from $542 million year over year. Revenue was also up 16%, to $7.7 billion. Netflix spends billions each year on content licensing and development.
Netflix acknowledged that new entries into the streaming market may have been a factor in the less-than-ideal results, while analysts note that the company’s recent price hike, making it one of the priciest streamers out there, likely didn’t help, especially during a period of large scale inflation.
The streamer estimates that over 100 million account holders share their login with someone outside their immediate household and appears to be making the case that getting at least some of those people to start paying separately is how it can boost its financials.
The company has already been testing a program in Costa Rica, Peru and Chile that attempts to detect shared accounts and offers the option to add an additional household account at a discounted rate or sign up for a separate one entirely.
“There’s a broad range of engagement when it comes to sharing households from high to occasional viewing. So while we won’t be able to monetize all of it right now, we believe it’s a large short- to mid-term opportunity,” the company said in a letter to investors.
Netflix estimates that the percentage of accounts sharing passwords has remained relatively steady but also noted that growth in demand for streaming due to COVID-19 may have “hidden” the impact of that to some degree.
That said, it’s not immediately clear what steps Netflix might take to crack down on password sharing in other parts of the world or how well its pilot is going.