Netflix lost 200,000 subscribers in the first quarter of 2022. This marks Netflix’s first subscriber loss in over a decade. The OTT giant cited several reasons that crated the loss: the Russian invasion in Ukraine that led to pulling out its services from Russia, increased competition from other (emerging) platforms, and password sharing. As its losses are expected to continue, Netflix forecasts a global paid subscriber loss of 2 million for the second quarter.
The decline brought Netflix’s subscriber base to 221.6 million, down from 221.8 million in the previous quarter. Although Netflix has cited various causes behind the plunge, the major reason continues to be: Password Sharing.
How password sharing led to plunge in businesses?
In the competition for ‘unique’ content creation and consumption, the past few years witnessed a surge in the emergence of OTT platforms. Major competitors such as Apple TV+ and Disney+ showed break-neck growth in exclusive content from streaming services like Netflix and Amazon Prime Video.
In the bed of various subscription services, customers are increasingly sharing accounts with friends and family. This has resulted in a loss of over $9.1 billion for the video streaming (OTT) industry—only due to password sharing. Several reports expect the number to balloon to $12.4 Billion in 2024.
Are companies doing anything to prevent credential sharing?
This is absolutely fake. If you want free Netflix please use someone else's account like the rest of us. https://t.co/PHhwdA3sEI— Netflix India (@NetflixIndia) January 4, 2020
Previously, companies seemed relaxed about the increasing cases of password sharing. In fact, Netflix has joked about password sharing and encouraged users to continue doing so. However, as the market began to mature and growth slowed down, the loss in revenue started to haunt OTT services. Today, major OTT platforms are working relentlessly to fix the problem.
In March 2022, Netflix began testing a new, opt-in feature that will prompt subscribers to pay extra if sharing the service with people outside their own household. As per reports, the feature will add up to two “subaccounts” where members will have to pay an additional $2 to $3 for sharing their passwords with people outside their homes.
Password-sharing: Generosity or Liability?
Password sharing may be a harmless act (of generosity) for subscribers. But, it is a great loss factor for broadcasters. Only a few years ago, Netflix CEO Reed Hastings cited that password sharing is “something you have to live with.”
However, as the ratio of freeloaders to paid user accounts continue to grow, the issue has become too hazardous to ignore. The survival of broadcasters now depends on better content protection. And to begin with, they will need a greater understanding of the credentials problem and its impact.
Also Read: Is OTT Dependency Costing Us Too Much?