Netflix loses 200,000 paying users, cracks down on account and password sharing

Author | Li Yangxia

Netflix reported on Tuesday that it lost 200,000 subscribers in the first quarter of this year, its first decline in paying subscribers in more than a decade. Its stock price fell more than 25% in the following hours. The company pessimistically predicted that it would lose another 2 million subscribers in the second quarter.

The world's largest streaming video company blamed stagnant subscriber growth on increased competition, password sharing, inflation and other factors.

Netflix then issued a warning that it would crack down on account sharing worldwide. In the future, it may not be so easy to borrow the password of family, friends, or unfamiliar people.

Netflix said it estimates that more than 30 million households in the U.S. and Canada use shared passwords to access its content. Globally, there may be more than 100 million households that use shared passwords.

In its quarterly letter to shareholders, Netflix acknowledged that it intentionally allows a lot of out-of-home password sharing because it helps keep users addicted to the service. But as competition from streaming companies such as Disney, Warner Bros. Discovery, Paramount Global, NBCUniversal, Apple TV+ and others eats into Netflix's growth, Netflix said it hopes the millions of households that share passwords will start paying.

The streaming platform, which now has 222 million subscribers worldwide, saw rapid growth during the pandemic, but as COVID-19 quarantines are gradually lifted and people resume more normal outdoor activities, the customer surge has faded and is now negative.

Netflix has increased its spending on content, especially original content, to continue to gain market share. To do this, it has raised prices for its service. The company said on Tuesday that those price changes helped boost revenue, but also contributed to the loss of 600,000 subscribers in the United States and Canada last quarter.

In the words of Netflix co-founder and co-CEO Reed Hastings, Netflix tolerates password sharing because the company "does a good job" without taking any tough measures.

For many years, Netflix has wanted to establish a consumer-friendly image for its brand, and allowing account sharing helps to shape this image. But now the situation has changed, growth has stagnated, and the company's attitude must also change.

Earlier this year, Netflix began testing different means of combating password sharing in Chile, Costa Rica, and Peru. If Netflix follows its model in those countries, it will charge additional fees to accounts that share passwords abroad.

Netflix did not disclose how it would act globally, but it only hinted that big changes could come as early as 2023.