Netflix may finally, actually, for real this time, have to crack down on password sharing.
On Tuesday, the OG streaming giant announced that it is losing subscribers for the first time in a decade in a letter to shareholders. To be exact: 200,000 subscribers have fled the platform, which went from 221.84 million paying members last quarter to 221.64 this quarter. Analysts had expected it to gain more than two million.
The company further projected that its customer base will continue to shrink next quarter, down to an estimated 219.64 million people.
Following the release of the letter, Netflix’s stock tanked, with share values dropping by more than 30% by Wednesday morning, reaching their lowest point in five years. Counterintuitively, following the Netflix crash, most of the Netflix competition also faced dips in their stocks. For example, Disney, which owns Disney Plus, fell by more than 5% and HBO Max’s parent company by about 4%. Why? A mystery.
In addition to the possibility of new limits on logins, Netflix might end up doing something else it’s never done: showing advertisements. “One way to increase the price spread is advertising on low end plans,” Netflix CEO, Reed Hastings, said in an investor call. He added, “Those who have followed Netflix know that I’ve been against the complexity of advertising and big fan of the simplicity of subscription. But as much a fan [as I am] of that, I’m a bigger fan of consumer choice.”
The pricing set-up and timeline for an ad-based, low-end subscription version of Netflix is unclear. But Hastings said it was something the company is “trying to figure out over the next year or two.” Further, he said Netflix was interested in “offering even lower prices with advertising,” seemingly insinuating that the current $15.49 standard plan won’t become inundated with Geico ads.
The company largely blamed the membership loss on competition and its existing success (i.e. there’s no new customers left). “Our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds,” Netflix wrote in the shareholder letter.
But the company also estimated that, on top of its more than 222 million paying subscribers, an additional 100 million households are leaching their Netflix content via password sharing—contributing to the losses. In response, the company is threatening to crack down on password sharing, stating that they’re working on the “monetization of multi-household sharing.”
So, if you want to be able to access that sweet, sweet Netflix original content long into the future, maybe its time to give up your friend-of-a-friend’s login info? (Gizmodo neither endorses nor denounces this idea.)
Finally, as with every good corporate announcement ever, Netflix blamed some of the losses on factors beyond their control. The letter lists “sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from COVID,” as partially responsible for the company’s subscriber downturn. The company said it lost about 700,000 Russian subscribers when it suspended service there.
Though total subscribers fell, Netflix still reported a quarterly revenue growth of almost 10%. So, on second thought, maybe you can hold onto your ex-uncle’s password after all.
Update 4/20/2022, 8:54 a.m. ET: This post has been updated with additional content from a Netflix investor call.