Netflix is a leading streaming video company.
Streaming television service Netflix has said that more than 100 million households across the world use a shared password, which is affecting its revenue, and warned that a crackdown is coming. Netflix shares lost a quarter of their value Tuesday after the company revealed its ranks of subscribers shrank - the first in more than 10 years - in the first quarter of this year.
The streaming giant estimated that while it has nearly 222 million households paying for its service, accounts are shared with more than 100 million other households not paying the television streaming service.
"Our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds,” Netflix said in an earnings letter.
“We're not growing revenue as fast as we'd like," the company said in the quarterly shareholder letter.
Co-Founder and CEO Reed Hastings said it's now a priority of the company to limit password sharing. "When we were growing fast, it wasn't a high priority to work on," he said during Netflix's investor video. "And now we're working super hard on it."
So far, Netflix has not taken any action against users sharing one password with family members in a bid to help get users hooked on the service.
Hastings had said in 2016 that Netflix was “doing fine” without taking any strong actions. He had said that companies will have to learn to live with password sharing “because there's so much legitimate sharing”.
When COVID-19 struck, Netflix registered a significant growth in 2020 but the growth subsided ad restrictions were lifted. And with competition from Disney, Warner Bros. Discovery, Paramount Global, NBCUniversal, Apple TV+ and other streamers eating into its growth, Netflix said it wants the millions of households sharing passwords to start paying.
"Account sharing as a percentage of our paying membership hasn't changed much over the years, but, coupled with the first factor, means it's harder to grow membership in many markets - an issue that was obscured by our COVID growth.," Netflix said in a statement.
The company last year began testing ways to make money from people sharing accounts, such as by adding a feature that lets subscribers pay slightly more to add other households. It has so far not talked about any concrete changes, but NBC reported that global changes are expected to come in 2023.