Netflix could charge users for password sharing amid a wave of unsubscriptions

The streaming giant experienced a subscriber loss for the first time in a decade, with over 200,000 viewers canceling their subscriptions in the first three months of 2022.

Netflix revealed that the trend might continue, costing the company another two million users in the second quarter. The results are completely out of line with the original predictions of 2.5 million extra Netflix subscribers in the first quarter. The development caused Netflix’s stock to plunge about 30%.

The company addressed a number of factors that have influenced the first wave of customer losses since 2011. As such, Netflix cited delayed adoption of broadband and Smart TVs and higher competition or “streaming wars” with TV giants. Increased inflation and the war in Ukraine, which prompted Netflix to shut down its services in Russia, thus losing 700,000 accounts, and raise plan prices, were also mentioned.

Additionally, Netflix partially attributed the decline to households sharing passwords among family members, suggesting that 30 million families in Canada and the US, as well as over 100 million households worldwide, violate their policy by sharing accounts.

"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," Netflix said.

Reed Hastings, the Co-Chief executive of Netflix, has previously stated that most of the sharing is legitimate within family boundaries. Furthermore, the company ignored the practice as it partially attributed the impressive growth to account sharing, which attracted more users to the platform.

However, Hastings told shareholders that the situation has since changed.

"When we were growing fast, it wasn't a high priority to work on [account sharing]. And now we're working super hard on it," Hastings said, BBC reports.

“Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor [that are not directly controlled,] means it’s harder to grow membership in many markets - an issue that was obscured by our COVID growth,” Netflix’s letter to shareholders reads.

The company has already started to crack down on account sharing in some countries – and the trend might continue in more regions. As such, users in Chile, Costa Rica, and Peru are now subject to additional payments for adding users outside of their households. Adding up to a maximum of two profiles would cost viewers $2-$3 in addition to their monthly subscription price.