Investors were shocked by the unexpected net loss of 200,000 subscribers. They had been told that they would see a gain of 2.5million subscribers. Netflix shares fell 35% following the news, falling below their lowest level since January 2018.
According to the Los Gatos company, around 100 million households are using its service free of charge by sharing it with a friend or family member. This includes 30 million households in the U.S., and Canada. During Tuesday’s shareholder call, Reed Hastings, CEO of Netflix, stated that more than 100 million households have already chosen to watch the service. “We just need to be paid some amount for them.
It may not seem like much at first. Netflix already has programs in Latin America that are soft and easy to use to get people to sign up. For $3 per month, subscribers can create sub-accounts to allow them to access Netflix for up two people outside of their household. Hastings suggested Tuesday that the company might adopt similar policies in other markets.
However, some current subscribers feel that even a gentle nudge could push them to leave.
Alexander Klein lives in Albany, N.Y. He has been a Netflix subscriber since 2013, and shares his account his mother-in law. He likes Netflix, but a series of price increases and the loss or license of shows have annoyed him. Any password-sharing crackdown could be the final straw.
He said, “If they crack down on password sharing and I’m forced to pay the full $15 per month just for one person watching at once, that’s frustrating.” “If they did that, I would likely cancel.”
Experts say it’s unlikely that Netflix will crack down on password sharing, despite some concerns.
Raj Venkatesan (a professor of business administration at University of Virginia) said, “I believe we would see competitors taking different strategies here.” “Some will follow Netflix’s lead and ban password sharing. Others will make this a differentiator by promising simplicity and saying that you can only have one password per family member.
Netflix has been silent for years in the face of the secret practice of customers sharing passwords with others. This is despite the fact that Netflix has seen a lot of global growth. Hastings has passionately advocated for keeping Netflix ad-free in the past.
However, there is increasing competition. With their own streaming services, deep-pocketed competitors like Apple, Walt Disney, and HBO are beginning to challenge Netflix’s dominance. Consumers now have entertainment options other than binge-watching their favourite shows. Rising inflation is forcing families to reconsider how many streaming services they are willing to pay.
Investors have been feeling anxious for several months because of all this. This Wednesday’s selloff was on top of the earlier problems for the stock. It has lost 62 per cent of its market value since 2021 and has erased $167 billion of shareholder wealth.
J. Christopher Hamilton, a Syracuse University professor, stated that Netflix cannot afford to stop trying new ways to increase its profits in order to please shareholders.
Hamilton, who was a lawyer for the movie studios, said that it feels like Netflix is having a ‘come to Jesus’ moment. They were able to be strong and play the role of a disruptor for a while. They now have to confront the realities of business.
Hamilton believes that offering a cheaper version of Netflix with ads will be well received by those looking to save money. However, subscribers who are willing to pay more can still binge-watch without interruption.
However, the crackdown on password sharing may prove to be even more problematic.
“I believe we may be at a point of no return on password sharing,” stated Ben Treanor, digital marketing strategist for Time2Play. Time2Play recently examined the phenomenon of “streaming scammers”. “I believe there is a possibility that if someone throws someone off their account, they might not pick up their account.
Netflix has been through customer backlash before. In 2011, Netflix announced plans to charge for its streaming service. It had previously been offered as a free bundle with its DVD-by-mail service. After that change, Netflix lost 800,000. Hastings apologized for not executing the spin-off. The company rebounded.
Hastings has never liked ads, and views them as a distraction to the entertainment Netflix offers.
Ravin Ramjit, a 41 year-old Londoner, will not have any of them.
He said that he signed up for Netflix in order to avoid ads back then. Ads can be too distracting and interrupt your concentration, as well as the continuity of the show. It could be that you are in an intense scene and really enjoy it, but suddenly they stop.
David Lewis, a Norwalk, Connecticut staple, says the changes aren’t too significant. Lewis has a premium plan that he shares with his three adult children, and some of their friends. He says they will continue to use it even if they have the friend cut off and each pay their own account.
He said, “We would keep Netflix” and pay for Netflix for all four members of our family, even though it cost more. We love the service and all it has to offer.
Netflix moved in a new direction last summer when it added video games to its service free of charge to give customers another reason to sign up.
