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Netflix is preparing to crack down on password sharing around the world, with the company telling shareholders Tuesday that it is a “big opportunity” for the streaming giant to help turn around its fortunes.
The company reported a quarterly subscriber loss Tuesday, ending Q1 of 2022 with 221.64 million subscribers, down from 221.84 million in Q4 of 2021.
In its shareholder letter, Netflix cited “the large number of households sharing accounts” as a critical factor “creating revenue growth headwinds.” Specifically Netflix estimates that “over 100 million” households worldwide are using shared Netflix accounts, including more than 30 million in the U.S. and Canada.
“This is a big opportunity as these households are already watching Netflix and enjoying our service,” the company wrote in its letter. “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. While these have been very popular, they’ve created confusion about when and how Netflix can be shared with other households.”
Netflix began to test out potential password-sharing effort last year, and this March, the company rolled out a pilot program in Costa Rica, Peru and Chile that would let users add additional members outside of their households if the company ID’ed that a password was being shared.
On Tuesday, the company left no doubt that the crackdown will expand in the near future.
“There’s a broad range of engagement when it comes to sharing households from high to occasional viewing,” the company said. “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.”
Still, Netflix noted that “account sharing as a percentage of our paying membership hasn’t changed much over the years,” but added that the COVID-spurred subscriber pull-forward obscured the impact that password sharing had on its business.
“We are trying to find a balanced approach here, that supports putting our members in charge,” COO Greg Peters said on the company’s earnings call.
Peters said that there will be a process before the company moves aggressively to crack down.
“It’ll take a while to work this out and get that balance right,” Peters said. “My belief is that we will go through a year or so of iterating, and then deploying that.”
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