Netflix, the world’s largest streaming video service, has issued a global warning about password sharing. This time, it appears to be a serious warning, and it may signal the end of the widespread habit of borrowing a family member’s or friend’s — or even a casual acquaintance’s — login credentials.
Netflix says that more than 30 million homes in the United States and Canada use a shared login to access its content. According to the business, more than 100 million extra homes throughout the world are expected to utilize a shared password.
Netflix started in its quarterly shareholder letter that it had purposely permitted generous out-of-home password sharing because it has helped consumers get addicted to the service. With competition from Disney, Warner Bros. Discovery, Paramount Global, NBCUniversal, Apple TV+, and other streaming services chomping at its heels, Netflix said that it wants the millions of homes that share 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 its 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.”
Netflix lost 200,000 paying customers in the first quarter ended March 31, marking the first time the company has lost subscribers in a period of more than ten years. In the second quarter, the business expects to lose another 2 million members.
There are presently 222 million members of the streaming platform throughout the world. It saw rapid growth during the epidemic, but as Covid-19 quarantines have been lifted, that growth has slowed – and has gone negative.
Netflix has tolerated password sharing because, in the words of co-founder and co-CEO Reed Hastings, the firm was “doing great” without taking any drastic measures.
“In terms of [password sharing], no plans on making any
changes there,” Hastings said in 2016. “Password sharing is something you have to learn to live with because there’s so much legitimate password sharing, like you sharing with your spouse, with your kids …. so there’s no bright line, and we’re doing fine as is.”
Over the years, Netflix has developed a consumer-friendly reputation, and permitting password sharing has aided that image.
“Sharing undoubtedly aided our growth by increasing the number of individuals who use and love Netflix,” the firm wrote in a shareholder letter. “And, with features like profiles and multiple streams, we’ve always attempted to make sharing inside a member’s home simple.”
However, the times have changed. When growth slows, people’s opinions tend to shift.
Netflix began exploring several approaches to prevent password sharing in Chile, Costa Rica, and Peru earlier this year. At the business’s earnings conference on Tuesday, executives indicated the company may expand the model it established in those nations, charging more for customers that exchange passwords outside of the house.
Netflix has yet to lay out a precise worldwide plan, although it has hinted that global changes might arrive as early as 2023.