Netflix points to competition, password sharing as users drop

Streaming giants Netflix have reported the company lost 200,000 customers in the first quarter for the first time since 2011 as they pointed to password sharing and growing competition as the causes of the dropped number of subscriptions.

As a result of the customer losses, Netflix has announced in the coming years that it will launch a cheaper, ad-supported subscription option for users, and will begin cracking down on people who share their passwords even before that. The company also said it would reduce its spending on movies and TV programming.

Password Sharing

The streaming platform with an estimated reach of 2.6 million subscribers in Africa estimated in its Q1 shareholders reports that more than 100 million global households use a shared password and don’t pay for it on top of its 221.6 million subscribers and will begin to make accounts that share passwords to pay up.

In the report, the management made this statement, “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,”

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It allows us to bring in revenue for everyone who is viewing and gets value from entertainment we’re offering,” Chief Operating Officer Greg Peters said during an interview with analyst Doug Anmuth of JPMorgan Chase & Co.

In March the streaming company announced that it would crack down on password sharing. In a blog post, the streaming giant revealed it would be testing an additional charge between $2 to $3 in Chile, Costa Rica, and Peru for subscribers who share accounts with people outside of their household.

Growing competition

Reed Hastings, one of the company’s co-founders, has stated for years that he does not want to offer advertising and has no objections to password sharing despite the fact that all of Netflix’s competitors provide or plan to offer advertising-supported services in the near future.

Netflix has always claimed that its subscribers prefer its service over cable television because it is free of advertisements. Hastings also didn’t want to compete in the internet ad market with Google and Facebook. Nonetheless, he has finally given in.

“Allowing consumers who would like to have lower prices and are ad tolerant makes a lot of sense,” Hastings said Tuesday. Netflix will explore the best way to offer advertising over the next couple of years.

Netflix also expects to lose another 2 million users in the current quarter, a significant setback for a firm that used to grow by 25 million subscribers or more per year.

According to Bloomberg, the company requires relief after losing subscribers in three of its four regions during the first quarter, including over 600,000 in the United States and Canada. The platform lost another 700,000 users as a result of Russia’s invasion of Ukraine, resulting in a total loss of 300,000 customers throughout Europe, the Middle East, and Africa.

Outside of the United States, Netflix continues to outperform most of its competitors and is the world’s largest streaming service. The company believes that by recruiting new customers with better programs and finding new methods to charge its current user base, it can get out of its current dilemma. The firm still intends to gain customers this year, and the second part of the year will feature a more solid lineup of new shows.