In response to a drastic decline in subscribers, streaming giant Netflix has indicated that friends and families who share their Netflix accounts might soon fall under the microscope.
“Our revenue growth has slowed considerably,” the company told shareholders on Tuesday, following the release of disappointing first quarter results. “Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.”
According to Netflix, more than 30 million households in North America are sharing an account, with number increasing by another 100 million households worldwide.
“Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor [slowed revenue growth], means it’s harder to grow membership in many markets — an issue that was obscured by our COVID growth,” Netflix said in a letter to shareholders.
By the end of its first quarter on March 31, Netflix reported a loss of 200,000 paid subscribers. The streaming giant has also predicted that another two million subscribers will leave the service in the second quarter. This is the first time in more than a decade that Netflix has lost subscribers in one quarter of business.
In the past, Netflix co-founder Reed Hastings said that the company would need to learn to live with password-sharing, and that shared accounts may have helped Netflix grow in the early stages. However, Hastings is now arguing that it has made growth more difficult, particularly in certain regions.
“When we were growing fast, it wasn’t a high priority to work on [password sharing]. And now we’re working super hard on it,” he said.
Currently, Netflix is experimenting with a password sharing prevention system in Chile, Costa Rica and Peru. Users there must pay in order to provide access to those outside their household, with up to two extra profiles costing between $2 and $3 more per month.
“The principle way we have is asking our members to pay a bit more to share the service outside their homes,” said Greg Peters, Netflix’s chief product officer.
However, according to Dominic Sunnebo, an analyst at research firm Kantar, the scheme could risk “alienating a potential future audience” if the “schemes to counter password sharing move too fast and too aggressively,” since “many who password-share beyond the household are not actually aware they’re breaking the terms of their subscription.”
According to Netflix, no concrete plans have been announced, but these proposed account changes could be imposed as soon as next year.
Ian Haworth is a writer for The Daily Wire and contributor to Morning Wire. Follow him on Twitter, Facebook, and YouTube.