On Tuesday, the world’s largest streaming giant, Netflix warned its users that a global crackdown on password sharing is heading their way. This could bring an end to the common practice of using a family member or friend’s login credentials to access the platform.
In a letter to shareholders released alongside its quarterly results, the platform acknowledged the struggles it’s facing in expanding its subscriber base, and reported a rare drop in total user subscriptions, from 221.8 million in Q4 2021 to 221.6 million during this year’s first quarter.
Netflix wrote in the letter:
Our relatively high household penetration—when including the large number of households sharing accounts—combined with competition, is creating revenue growth headwinds
According to an estimation Netflix shared, over 100 million households are using shared passwords to access its content globally, with over 30 million of these households located in the US and Canada. The company shared the estimate as it announced its plans to introduce more effective monetization of multi-household sharing. In the US and Canada, the platform’s subscriber base dropped from 75.2 million in Q4 2021 to 74.5 million in Q1 2022.
The quarterly shareholder’s letter further admitted that the company’s decision to turn a blind eye to password sharing all these years likely fueled the video-streaming service’s growth. However, the company now wants the account holders supplying the freeloaders to pay for the service they’re using.
By asking members who are sharing their accounts to pay more, it hopes to strike a balance between allowing sharing and helping generate revenue from everyone who’s been viewing and getting value from its service.
This isn’t the only way Netflix is planning to monetize its subscriber base. The company also shared that it’s planning on introducing an ad-supported plan.
