Entertaiment

Netflix Plans Password Sharing Crackdown After Losing 200,000 Subscribers, Stock Plunges


If you’ve been side-eyeing your Netflix account recently, you’re not alone. During the company’s first quarter 2022 earnings report, it was revealed that the streaming giant had lost 200,000 subscribers in the first quarter of this year. But perhaps the most interesting insight from this report is the revelation that Netflix plans to lose even more subscribers. And to combat the massive subscriber loss, and subsequent stock plunge from the announcement, the streamers plans to crack down hard on password sharing.

According to Variety, in January, Netflix reported that it had 221.84 million subscribers. This latest earnings report revealed that number has dropped to 221.64 million subscribers. As steep as that loss is, it’s nothing compared to its bigger predicted departure. The company announced that it expects to lose another 2 million subscribers in its second quarter, which is currently happening. The streaming service reported an operating income of $1.97 billion as well as a net income of $1.6 billion.

The company cited four reasons for its loss: the rate of adopting on-demand entertainment and data costs, account sharing, steep streaming service competition, and “macro factors.” That last category covers everything from further delays and upsets caused by COVID-19, inflation, slow economic growth, and Russia’s invasion of Ukraine.

In early March, the streaming service announced that it had suspended its streaming service in Russia. This announcement was made after Netflix had already paused its future Russian projects and acquisitions. According to statements from the company, this cutting of ties was both a protest of Russia’s invasion of Ukraine and a reaction to Russia’s new law, which mandated that Netflix carry state-owned channels.

“Our revenue growth has slowed considerably as our results and forecast below show,” Netflix said in a letter to shareholders. “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds. The big COVID boost to streaming obscured the picture until recently. While we work to reaccelerate our revenue growth – through improvements to our service and more effective monetization of multi-household sharing – we’ll be holding our operating margin at around 20 percent. Key to our success has been our ability to create amazing entertainment from all around the world, present it in highly personalized ways, and win more viewing than our competitors. These are Netflix’s core strengths and competitive advantages. Together with our strong profitability, we believe we have the foundation from which we can both significantly improve, and better monetize, our service longer term.”

But that predicted 2 million subscriber drop? That has to do with Netflix as a company. In January, Netflix announced that it would be raising its prices yet again, the third time this has happened in three years. The service’s basic monthly plan will increase from $8.99 a month to $9.99; its two-screen standard plan will jump from $13.99 to $15.49; and its four-screen plan will increase from $17.99 to $19.99 a month. That’s an average price increase of 11 percent all around.

The news of this Quarter 1 drop has already affected Netflix’s stock. Shares dropped more than 24 percent on Tuesday, the first time in over a decade that the company has reported a subscriber drop. It’s also a dip that’s emerged during a fairly strong programming season. Quarter 1 saw the premieres of such projects as Bridgerton Season 2 (a reported 627 million hours viewed), Inventing Anna (512 million), The Tinder Swindler (166 million), and The Adam Project (233 million).

In response to the drop in subscribers in particular, Netflix announced to stock-holders that they plan on expanding their plans to crack down on password sharing worldwide.

“This is a big opportunity as these households are already watching Netflix and enjoying our service,” the company wrote in a letter to shareholders. “Sharing likely helped fuel our growth by getting more people using and enjoying Netflix. And we’ve always tried to make sharing within a member’s household easy, with features like profiles and multiple streams. While these have been very popular, they’ve created confusion about when and how Netflix can be shared with other households.”

The password sharing crackdown has already been tested in other areas of the world, but given the massive drop in subscribers, it seems that experiment may become more widespread. We’ll continue to follow this story and update with additional news.

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