Netflix loses subscribers en masse and blames account sharing

Says a maxim that “what goes up, must come down”. Netflix, which began its career as a video store for online rental of physical movies, opted for a model that no one believed in, such as watching series and movies in streaming on demand (VOD). And with the change in mentality in the last decade towards more digital than physical content, her commitment made her the queen of VOD.

Netflix loses users

But that was a long time ago, and in the current situation the VOD market is not saturated, but it is with many important actors such as Disney +, HBO Max and more that are emerging – there we have Paramount + for example. They all want their piece of the streaming pie, and competition is inevitable. For this reason, Netflix is ​​concerned that its latest figures show losses for the first time in many years.

And it is that around 200,000 users have canceled their Netflix subscription in the first three months of 2022, the first time in a decade, which has meant a 25% drop in the company’s shares, which indicates that In the next three months of April – June 2022, a loss of 2 million users is projected.

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200,000 now and 2 million in the summer

Netflix has suffered its biggest blow since losing 800,000 subscribers in 2011 as a result of plans to start charging separately for its then-fledgling streaming service, which had been bundled for free with its traditional DVD-by-mail service. Customer reaction to the move prompted Netflix CEO Reed Hastings to apologize for botching the execution of the split.

This year’s drop was due in part to Netflix’s decision to withdraw from Russia in protest of the war against Ukraine, resulting in a loss of 700,000 subscribers. As the company pointed out to shareholders on Tuesday after publishing its first quarter results, “Our revenue growth has slowed considerably. Our relatively high household penetration – if you include the large number of households that share accounts – combined with competition, is creating headwinds to revenue growth.”

Share accounts, the culprit

Yes, along with competition and situations such as Russia’s current war with Ukraine, Netflix points the finger at the gesture of sharing accounts as one of the culprits in this situation. According to the Pew Center for Internet and Technology, approximately 2 in 5 online adults have shared VOD platform account passwords with friends or family. And among the Millennial generation the figure is even higher: 56% of online adults between 18 and 29 years old have shared passwords.

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According to another study, more than a quarter of video streaming services are used by multiple households. That includes having a family or friend share the bill outside the household or, less commonly, multiple households splitting the cost. And 16% of all households have at least one service that is paid for entirely by someone else, according to the Leichtman Research Group study. This figure increases to 26% in the case of young people between 18 and 34 years of age.

Netflix has already stated its intention to end this practice of paying standard and Premium accounts among several and using them in different homes. In fact, in January of this year he indicated that he wants to prohibit the sharing of accounts, and Netflix tested a new function that, through a pop-up message, warns people who share your password and who don’t live with the password owner that they have to pay their own bill. They are apparently asking users to verify that they are the owner or a member who has direct access to the same password by asking them to enter a verification code.

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This code is sent by text message or email, but the platform still offers the possibility to verify it later or simply ignore the message. Password sharing is estimated to cost streaming services several billion dollars a year in lost revenue.

Pay more to include someone else on Netflix

According to Variety newspaperNetflix will soon launch a test in three countries – Chile, Costa Rica and Peru – that will allow members who share their accounts with people outside their household to do so “in an easy and safe way, also paying a little more, according to Chengyi Long, director of product innovation at Netflix. The new options will roll out in the coming weeks in all three countries (and may or may not expand beyond those markets). all three countries (and may or may not expand beyond those markets).

With the function “add an additional member”Netflix Standard and Premium plan members will be able to add subsidiary accounts for up to two people they don’t live witheach with their own profile, personalized recommendations, login and password, for less than the cost of a separate Netflix plan. The cost of the add-on is $2.99 for each person added, which is added to what you already pay per month for Netflix.

And the prices, will they have to do?

An interesting fact is that this drop in users on Netflix is ​​not only motivated by the departure of Russia, but also that the losses are due to the fact that many people decided not renewing your service after Netflix’s latest price hike, whose Premium plan is practically worth 20 dollars in the United States, and 18 euros in Spain. In fact, according to the BBC, 600,000 users did not renew after the price increase in the US and Canada in January.

Netflix’s justification is that in this way it will be able to create more and better exclusive content for its subscribers, who have more VOD offers from other platforms to choose from in the current era as well. And looking at this problem and account sharing, the service plans to make a move to increase its ‘subs’: cheaper plans and ads.

Netflix cheaper and with ads in the broadcasts?

One of the advantages of VOD services is that you don’t have to see the advertising that conventional TV channels broadcast among their content. That’s what you pay them for, to watch something uninterrupted. But the golden age seems to have passed, and if you want cheaper Netflix, it may be at the cost of watching ads.

Netflix co-CEO Reed Hastings revealed the movement in the meeting with shareholders last Tuesday, adding that the company will examine what those plans will look like.”during the next year or the next”. Netflix COO Greg Peters said the advertising “It’s an exciting opportunity for us.”

“Those who have followed Netflix know that I’ve been against the complexity of advertising, and I’m a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m more of a fan of consumer choice. And allowing consumers who want a lower price, and who are tolerant of advertising, to get what they want makes a lot of sense.”

Would you pay a cheaper Netflix in exchange for watching ads like on conventional TV? Or would you not like that measure?