Crackdown on Netflix account login: Streaming giant warns of password sharing restrictions, here’s what it means for you

Netflix announced its first major loss of subscribers in a decade after leaving Russia and claims that 100 million households are using it without paying for it.

Now, the streaming platform suggests it will start running ads, tackle password sharing and strive for a quality-over-quantity content approach.

Watch the video to learn more about Netflix’s record loss

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Such measures may include charging users a fee for sharing their accounts outside their households.

The global streaming juggernaut ended the first three months of the year with 200,000 subscribers, well below the forecast of 2.5 million paying customers.

The company lost 700,000 subscribers in early March after deciding to suspend service in Russia after the country launched its invasion of Ukraine.

The company lost 700,000 subscribers in early March after it decided to suspend service in Russia after the country invaded Ukraine. Credit: Brandon Bell/Getty Images

Netflix, which currently has 221.6 million users, saw record growth in demand in the early days of the pandemic as people worldwide were stuck at home and flocking to their screens to binge-watch shows and movies.

But password sharing and stiff competition from other streaming platforms have made it harder for Netflix to attract new viewers.

To increase the number of subscribers and limit the loss of revenue, the company proposed several new measures, such as charging users a password-sharing fee and introducing a cheaper ad-supported plan.

This is everything viewers can expect from Netflix in the future.

A potential crackdown on password sharing

More than 100 million households use Netflix without paying, the company reports in a letter to shareholders on Tuesday.

Netflix admitted that users could share their passwords as more people became addicted to the platform.

But increased competition from Amazon Prime Video, Hulu, Disney+, and others has made it much harder for the company to grow its member base.

More than 100 million households use Netflix without paying; the company admitted it allowed password sharing as more people became addicted to its platform. Credit: Getty Images

“Our relatively high household penetration — considering the large number of households sharing accounts — coupled with competition is driving revenue growth headwinds,” Netflix wrote in its letter.

Last month, Netflix announced it would begin testing ways to charge users in Chile, Costa Rica, and Peru who share passwords a fee for the additional members.

Executives said this model could be expanded to other countries during the company’s earnings call on Tuesday, but it was unclear when those changes would be made.

A cheaper, ad-supported service

Netflix co-founder Reed Hastings has long resisted ad placement, but the company changed on Tuesday.

“Those who have followed Netflix know that I have been against the complexity of advertising and that I am a big fan of the simplicity of subscriptions,” Hastings said in a taped interview.

“But as much as I’m a fan of that, I’m a bigger fan of consumer choice.

“And it makes a lot of sense to let consumers who want a lower price and are ad tolerant get what they want.”

CEO Reed Hastings previously opposed advertising but says consumers are “advertising tolerant” and would accept the change if it meant being charged less. Credit: AP

Hastings attributed the decision to embrace an ad-based subscription model to Netflix’s competitors, suggesting the streaming service could outsource ad targeting.

“In terms of earning potential, the online advertising market has definitely progressed, and now you don’t have to include all the information about people that you used to,” he said.

“We can stay out of that and focus on our members, creating that great experience.”

The move to advertising has been greeted with skepticism by some Wall Street analysts, including Rich Greenfield, partner and media and technology analyst at LightShed Partners.

He said adding ads would likely result in lower watch time per user per day and, ultimately, higher user churn.

“The question from Netflix and ads is whether this is the answer they believe in or is this desperation from a management team that doesn’t know what’s happening to their business right now?” Greenfield wrote in a note to customers.

‘Withdraw’ content spend.

To further boost revenue growth, Netflix said it would also “retreat” spending on its movies and TV shows.

“We are pulling back some of our spending growth for content and non-content,” said CFO Spencer Neumann in a taped interview.

“We’re trying to be smart about it and be careful about pulling back some of that spending growth to reflect the reality of the company’s revenue growth,” he said.

This is a move that analyst Greenfield said was necessary but perhaps insufficient.

“The biggest issue that hasn’t been discussed is that Netflix’s content, especially the English-language content, just doesn’t resonate with the spending level,” he wrote.

Netflix is ​​rethinking its content strategy to offer content that reflects the zeitgeist, such as Squid Game or The Crown. Credit: AP

At $17 billion a year, Greenfield noted that Netflix currently spends more on content than its competitors.

While that spending level will likely need to be cut, Netflix should rethink its content strategy more broadly, Greenfield said.

“While the consumer appeal of Netflix content has always mattered, the need for better content has become much more important as competition has intensified over the past two years,” said Greenfield.

“By ‘better,’ we don’t mean quality; we mean content that reflects the zeitgeist, be it The Crown of Stranger Things, Squid Game, or Tiger King.

“Having enough ‘good enough’ content is no longer enough.”