Netflix to crack down on password sharing after losing 200,000 users

After the number of Netflix subscribers dropped and its shares spiraled downward on Wednesday, the streaming service said it is considering experimenting with ads and cracking down on password sharing. 

From January to March, Netflix lost 200,000 subscribers, the first drop in subscribers that the company has gone through in ten years. Netflix expects an additional loss of 2 million subscribers for the April-June quarter. 

Part of the drop in customers came from Netflix’s decision to withdraw from Russia to protest the Kremlin’s invasion of Ukraine, reported The Associated Press. However, the decision cost the streaming service 700,000 users. 

Furthermore, Netflix lost around 600,000 subscribers in the U.S. and Canada due to price increases. In January, Netflix raised prices to $9.99 a month for the basic plan (up from $8.99), $15.49 for its standard tier (up from $13.99), and $19.99 for its 4K tier (up from $17.99), reported The Verge. 

On Wednesday, the company’s stock fell by 37%. If the stocks close with this fall, it could mean that $170 billion of its shareholder wealth will have been erased in less than four hours. 

"Our revenue growth has slowed considerably," the firm told shareholders on Tuesday. "Our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds."

Adding to the loss of subscribers is the millions of users who share their passwords with friends or other family members. According to Netflix, over 100 million households worldwide and 30 million in the U.S. and Canada watch the service for free. 

“Those are over 100 million households already are choosing to view Netflix,” Netflix CEO Reed Hastings said. “We’ve just got to get paid at some degree for them.”

"We've always tried to make sharing within a member's household easy, with features like profiles and multiple streams," Netflix said in its statement. "While these have been very popular, they've created confusion about when and how Netflix can be shared with other households."

To access these user that are not paying, Netflix plans to roll out a trial program that allows subscribers to extend the service to another household for a discounted price. Since last month, the program is already running in Chile, Costa Rica, and Peru. In Costa Rica, a subscriber can add another household for an additional $3

"The principle way we have is asking our members to pay a bit more to share the service outside their homes," said Greg Peters, Netflix's chief product officer. 

Netflix also mentioned adding ads to the movies and shows, similar to its streaming rival Hulu. However, the streaming service offered no information about this addition.

Netflix believes that these two measures will help retain or even expand its 221.6 million users worldwide. However, the company is also aware that the move could also alienate other customers or cause them to cancel their subscription to the streaming service.