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Netflix Signals Password-Sharing Crackdown; 45% of Users Share Accounts

Matt Tamanini

When Netflix announced that they were testing a program to attempt to curtail password sharing in Chile, Costa Rica, and Peru, many assumed it was only a matter of time until it was rolled out worldwide, and it looks like the streamer might be planning on doing that in the very near future.

On Tuesday, the streaming giant announced that they had lost 200,000 subscribers during the first quarter of 2022, due in no small part to shutting down operations in Russia, which resulted in the loss of 700k customers. In addition, the streamer also flagged “the uptake of connected TVs …, the adoption of on-demand entertainment, and data costs” as reasons for the subscription slowdown, but they also noted that they believed that there are over 100 million households worldwide who use their service, without paying for it.

In the company’s letter to shareholders, Netflix said, “In addition to our 222m paying households, we estimate that Netflix is being shared with over 100m additional households, including over 30m in the UCAN (United States and Canada) region. 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.”

That means that 45% of the people who are using Netflix are doing so either for free or by sharing an account; both arrangements substantially eat away at the company’s potential revenue pool. Netflix indicated that the streamer would be looking to jumpstart growth through “more effective monetization of multi-household sharing.”

In the South American tests, users are able to add sub-accounts for up to two people whom they don’t live with and both “sub-accounts” come with their own profile, personalized recommendations, login, and password. Additionally, users are able to transfer profile information either to a new account or an Extra Member sub-account, meaning that the viewing history, My List, and personalized recommendations will be transferred with the account so that nothing is lost.

The extra member accounts cost approximately $2.99 in U.S. Dollars, meaning that if Netflix maintained that price structure and was able to convert all of the global password-sharing users to these new sub-accounts, they could increase their subscriber total to 322 million users and annual revenue by $3.588 billion.

Of course, between January’s price increases and a tighter grip on password sharing, Netflix runs the risk of alienating customers. The streamer seems to recognize this as they are forecasting a loss of 2 million subscribers in the second quarter of this year.

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