Reed Hastings, CEO of Netflix, attended a press conference in Mexico City, Mexico.
Hector Vivas Getty Images
Today may be a gloomy day for your ex-boyfriend’s brother.
Netflix, the world’s largest video streaming company, has warned that global crackdown on password sharing is imminent. This time seems like a serious warning and could mean the end of the widespread practice of borrowing entry information from a family member or friend – or a free acquaintance.
Netflix said it estimates that more than 30 million households in the United States and Canada use a shared password to access their content. The company said more than 100 million additional households are likely to use a shared password worldwide.
In a quarterly letter to the shareholder, Netflix acknowledged that it purposefully allowed generous password sharing outside the home because it helped users hook up with the service. But with Disney competition, Warner Bros. Discovery, Paramount Global, NBCUniversal, Apple TV + and other streamers that are eating away at its growth, Netflix said it wants millions of password-sharing households to start paying.
“Our relatively high penetration of households – when it includes a large number of households sharing accounts – combined with competition, creates barriers to revenue growth,” the Netflix letter said. “Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, together with the first factor, it means it’s harder to increase membership in many markets – a problem that has been clouded by our growth at COVID .
Netflix reported a loss of 200,000 paid subscribers in the first quarter ended March 31 – for the first time in more than 10 years, Netflix lost subscribers in the quarter. The company estimates that it will lose 2 million more subscribers in the second quarter.
The streaming platform currently has 222 million subscribers worldwide. It enjoyed a boom in growth during the pandemic, but that customer growth slowed – and is now negative – as Covid-19 quarantines were largely lifted.
Planning repression
Netflix lives by sharing passwords because the company, in the words of co-founder and co-CEO Reid Hastings, is “doing well” without taking any harsh action.
“In terms of [password sharing]there are no plans to make changes there, “Hastings said in 2016. Sharing passwords is something you have to learn to live with because there is as much legitimate password sharing as sharing with your spouse and children. its …. so there is no bright line and we are doing well as it is. “
Netflix has built a user-friendly brand over the years, and allowing password sharing has helped with that image.
“Sharing has probably helped us grow by making more people use and enjoy Netflix,” the company said in a note. “And we’ve always tried to make sharing a member’s household easy, with features like profiles and multiple streams.”
But times have changed. And when growth stops, attitudes tend to change.
Earlier this year, Netflix began testing various ways to restrict password sharing in Chile, Costa Rica and Peru. Executives said in a call about the company’s earnings on Tuesday that it could expand the model it has unveiled in those countries by charging extra for accounts that share passwords outside the home.
Netflix has not yet outlined a specific global strategy, but suggests that global change may come as early as 2023.
WATCH: Netflix profits are a warning for streaming services
Disclosure: Comcast is the parent company of CNBC and NBCUniversal.