Streaming giant Netflix has hinted again it will clamp down on households sharing passwords, as it revealed a big fall in subscribers in its first quarter results.

It has been an eventful couple of years for Netflix, as it faces added competition from Disney, Apple, Amazon and HBO which it said is affecting its prospects.

Last month it raised prices in certain countries, including the UK and Ireland, for the second time in less than 18 months.

Growth challenge

That same month Netflix suspended its service in Russia, and halted all future projects and acquisitions in the country as it assessed the impact of Moscow’s invasion of Ukraine.

Disgruntled Russian users opted to sue Netflix for loss of service last week.

Netflix had launched its streaming service in Russia in 2016 and only had about 1 million users in that country.

All of these issues have not helped the streaming service maintain the pace of growth it had seen during the pandemic.

Netflix added 18.2 million subscribers last year, about half the number who signed up in 2020.

In January Netflix said it had grown its global customer base to a total of 222 million subscribers during 2021.

It has 14 million subscribers in the UK, and 600,000 in Ireland.

Customer decrease

But now in its first quarter results, Netflix has revealed that some 200,000 people left the streaming service in the first three months of the year.

This is its first loss of subscribers in nearly ten years and reflects the amount of competition it now faces.

And to make matters worse, Netflix warned shareholders another two million subscribers were likely to leave in the three months to July.

This resulted in its share price falling 20 percent on Tuesday.

But the streaming giant is still making good money, and during the first quarter it posted a net profit of $1.6bn, down from a profit of $1.7bn in the same year-ago quarter.

Revenues were $7.8 billion, up from $7.1bn a year earlier.

Password sharing

It has been clear for a while now that Netflix has been considering how best to grow its revenue stream.

“Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally,” it said in its quarterly results. “However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds.

In March last year Netflix warned it was testing account passwords, as it sought to clampdown on the revenue losing problem of password sharing.

Then a year later in March 2022, Netflix began testing new tools to crackdown on the widespread practice of password sharing between people who don’t live in the same household.

The streaming giant began testing the crackdown in three countries, namely Chile, Costa Rica and Peru.

It is also certain to expand the scheme, after it said “another focus is how best to monetise sharing – the 100M+ households using another household’s account. This is a big opportunity as these households are already watching Netflix and enjoying our service.”

Co-founder and chairman Reed Hastings on an earning call said Netflix was also looking at the range of its plans and was weighing whether to add a cheaper, ad-supported subscription as “a consumer choice”, a model he has avoided in the past.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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