Netflix loses subscribers for first time in over 10 years, blames password sharing

In January, Netflix reported its first monthly subscription increase in two years, but the latest earnings reports show the company is facing challenges.

Netflix on Tuesday reported the biggest loss of subscribers for the first time in over 10 years. The streaming giant lost 200,000 subscribers globally in the first quarter, and it forecasted even bigger trouble ahead. According to Netflix’s estimates, it could lose up to 2 million subscribers in the upcoming second quarter — owing to the increase in subscription tariff and the fact that Netflix is working on a feature to curb password sharing.

“Our revenue growth has slowed considerably,” Netflix wrote in a letter to shareholders Tuesday. “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.”

In January, Netflix reported its first monthly subscription increase in two years, but the latest earnings reports show the company is facing challenges in retaining existing customers as well as attracting new ones, even though it is still the largest streamer in the world with around 222 million subscribers. Netflix said it lost 600,000 customers in the US and Canada this quarter. The data for Indian customers as well as those elsewhere, however, is not revealed in the report.

But the company highlighted that the subscribers discontinued their subscription because of the price change, but the slowdown in the company’s growth could be because of account sharing.

However, the price increase may not just be the only problem for Netflix. In March, Netflix introduced two new paid sharing features in at least three markets as a part of its efforts to stop password sharing between different households. Netflix estimates that there are over 100 million households using another household’s account — something Netflix sees as a roadblock to its growth after so many years.

“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,” the streaming giant said.

Netflix CEO Reed Hastings, however, believes that monetise account sharing will spur growth in ARM and revenue. “...revenue and viewing will become more important indicators of our success than membership growth.”