After growing massively during the pandemic-related lockdowns, The streaming giant is kinda running out of room to grow. Netflix will need to crack down on password sharing to keep the numbers increasing.
Recently, Netflix reported a subscriptions loss of 200,000 in total from the last quarter. Technically, it lost a whopping 700,000 subscribers due to suspending its service in Russia over the country’s invasion of Ukraine. However, Netflix gained 500,000 subscribers during the period, so bringing the total loss to 200,000.
Netflix had forecasted a gain of 2.5 million for the quarter. So excluding the Russia reason, even that 500,000 subscriber gain didn’t come anywhere near.
Netflix says that competition for streaming services continues to incline between Hulu, YouTube, Amazon Prime Video, Disney+, etc. Amid all of this, the biggest issue Netflix sees is the account password sharing between multiple households.
“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 told shareholders.
“However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds,” the letter reads. “The big COVID boost to streaming obscured the picture until recently. While we work to reaccelerate our revenue growth – through improvements to our service and more effective monetization of multi-household sharing – we’ll be holding our operating margin at around 20%.”
Netflix estimates that alongside 222 million subscribed households, it also has an additional 100 million users sharing passwords with paying households.
“Early last year we started testing different approaches to monetize sharing and, in March, introduced two new paid sharing features, where current members have the choice to pay for additional households, in three markets in Latin America,” the letter continues. “There’s a broad range of engagement when it comes to sharing households from high to occasional viewing. So while we won’t be able to monetize all of it right now, we believe it’s a large short- to mid-term opportunity.”
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