There’s a whole lot of password-sharing going on across Netflix’s customer base — and the streaming giant is eager to pocket a big chunk of change from the freeloading masses.
In reporting a huge subscriber miss — with a net loss of 200,000 for Q1 and a projected drop of 2 million for the second quarter — Netflix said that members who are sharing their login credentials outside the home are contributing to its slowing growth in 2022. The company estimated that legitimate Netflix passwords are being shared in violation of its rules with more than 100 million non-paying households worldwide, including over 30 million in the U.S. and Canada alone.
“Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with [the slowing pace of broadband and connected TV adoption] means it’s harder to grow membership in many markets — an issue that was obscured by our COVID growth,” Netflix said in its letter to shareholders.
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Netflix said it is focused on “how best to monetize sharing,” calling it “a big opportunity as these households are already watching Netflix and enjoying our service.”
Last month, Netflix announced the launch of tests in three Latin America countries (Chile, Costa Rica and Peru) to address password sharing. Customers are able to add up to two Extra Member accounts for about $2-$3/month each, on top of their regular monthly fee. According to estimates by Wall Street firm Cowen & Co., if Netflix rolls the program out globally, it could reap an incremental $1.6 billion in global revenue annually.
“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,” Netflix said in its Q1 shareholder letter. “While these have been very popular, they’ve created confusion about when and how Netflix can be shared with other households.”
The test in Latin America is aimed at clearing the air over what Netflix deems OK in terms of sharing account access. “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,” the company said. “As we work to monetize sharing, growth in ARM [average revenue per membership], revenue and viewing will become more important indicators of our success than membership growth.”