Netflix CEO Reed Hastings attends a press conference in Mexico City, Mexico.
Hector Viva | Getty Images
Today could be a dark day for your ex-boyfriend’s brother.
Netflix, the world’s largest video streaming company, has warned that a global crackdown on password sharing is coming. That seems like a serious warning this time around, and it could mean an end to the rampant practice of borrowing login credentials from a family member or friend – or loose acquaintance.
Netflix said it estimates more than 30 million US and Canadian households use a shared password to access its content. The company said more than 100 million additional households are likely using a shared password globally.
In its quarterly letter to shareholders, Netflix acknowledged that it deliberately allowed generous out-of-home password sharing because it helped users become addicted to the service. But with competition from Disney, Warner Bros. Discovery, Paramount Global, NBCUniversal, Apple TV+ and other streamers stunting its growth, Netflix said it wants the millions of password-sharing households to start paying.
“Our relatively high household penetration — if you include the large number of households sharing accounts — combined with competition, creates headwinds for revenue growth,” Netflix said in its letter. “The percentage account share of our paid membership hasn’t changed much over the years, but when combined with the first factor, means it’s harder to grow membership in many markets – an issue that has been obscured by our COVID growth.”
Netflix reported a loss of 200,000 paid subscribers in the first quarter ended March 31 – the first time in over 10 years Netflix has lost subscribers for a quarter. The company expects to lose another 2 million subscribers in the second quarter.
The streaming platform currently has 222 million subscribers worldwide. It has grown by leaps and bounds during the pandemic, but that the influx of customers has calmed down – and now turned negative – as the Covid-19 quarantines have been largely lifted.
Plan repression
Netflix lived with password sharing because the company was, in the words of co-founder and co-CEO Reed Hastings, “is fine” without taking strong action.
“In terms of [password sharing]there are no plans to make any changes to it,” Hastings said in 2016. “Password sharing is something you have to learn to live with because there is so much legitimate password sharing , like you share it with your spouse, with your kids….so there’s no clear line, and we’re doing fine.”
Netflix has built a user-friendly brand over the years, and allowing password sharing has helped build that image.
“Sharing has likely helped fuel our growth by allowing more people to use and enjoy Netflix,” the company said in its note to shareholders. “And we’ve always tried to make it easier to share within a member’s household, with features like profiles and multiple streams.”
But times have changed. And when growth stops, mentalities tend to change.
Earlier this year, Netflix started test different ways to restrict password sharing in Chile, Costa Rica, and Peru. If Netflix follows the model it has established in these countries, Netflix will charge additional fees for accounts that share passwords away from home.
Netflix has yet to set out a global strategy, but suggested that global changes will occur “in the short to medium term”.
WATCH: Netflix revenue is a warning for streaming services
Disclosure: Comcast is the parent company of CNBC and NBCUniversal.
