After an unprecedented decline in customer growth in the first quarter, Netflix executives are watching millions of people using other subscribers’ accounts as a way to change the current trajectory of their streaming service. Netflix -35.12% of executives said the service lost 200,000 paid subscribers in the quarter. For the first time since Netflix had less than 200,000 streaming subscribers, they expect to lose 2 million subscribers in the current quarter. The sudden drop criticized the company’s revenue growth forecasts; Accordingly, more than 25% of the shares fell on Tuesday.
Executives see an easy way to generate more revenue for up to 100 million new subscribers: by stopping password sharing. In a letter to shareholders, executives estimated that many families used the service without payment—221.6 million paid by logging into subscriber accounts. The firm hopes to re-accelerate revenue growth through service improvements and other practical tools. Executives described the termination of password sharing in the shareholders’ letter as a great opportunity.
Tests on how to stop sharing passwords have already begun. In March, the company announced the launch of two new paid sharing features, where current members have the option to pay for extra families in three Latin American markets. According to the chief product officer of Netflix, the company plans that if you share the service with your sister or another family member in another state, it is likely to require a relatively higher payment request. In fact, the firm is currently trying to find a balanced and customer-oriented approach. It is expected that Netflix will need one year to work out the final solution.
Netflix Income Growth Strategy
Wall Street analysts have been concerned about Netflix users sharing passwords since at least 2013; Based on searches for analyst conference calls and presentations on Wall Street over the past ten years; However, the executives have so far avoided a full-blown raid. The company has strict restrictions on simultaneous streaming capabilities. Users who reach this limit are asked to renew their accounts.
Another way Netflix intends to make more money will eventually be by having an ad-supported service. The CEO mentioned in a video interview that Netflix is considering creating an ad-supported subscriber level at a lower price.