ENTERTAINMENT

As shares plunge, Netflix takes aim at password sharing

Apr 20, 2022, 5:36 AM | Updated: Jun 13, 2022, 3:35 pm
In this photo illustration the Netflix logo is seen on September 19, 2014 in Paris, France. Netflix...
In this photo illustration the Netflix logo is seen on September 19, 2014 in Paris, France. Netflix September 15 launched service in France, the first of six European countries planned in the coming months. (Photo by Pascal Le Segretain/Getty Images)
(Photo by Pascal Le Segretain/Getty Images)

SAN FRANCISCO (AP) — A sharp drop in subscribers sent Netflix shares into freefall Wednesday, forcing the company to consider experimenting with ads and — hold onto your remote — cracking down on millions of freeloaders who use passwords shared by friends or family.

Looming changes announced late Tuesday are designed to help Netflix regain momentum lost over the past year. Pandemic-driven lockdowns that drove binge-watching have lifted, while deep-pocketed rivals such as Apple and Walt Disney have begun to chip away at its vast audience with their own streaming services.

Netflix’s customer base fell by 200,000 subscribers during the January-March quarter, the first contraction the streaming service has seen since it became available throughout most of the world other than China six years ago. The drop stemmed in part from Netflix’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers. Netflix projected a loss of another 2 million subscribers in the current April-June quarter.

The steep erosion, which follows a year of progressively slower growth, has given Netflix investors major jitters. The company’s stock was down as much as 37% midday Wednesday. If the stock closes at this level, the selloff will have wiped out nearly two-thirds of Netflix’s market value since the end of last year, erasing $170 billion in shareholder wealth in less than four months.

The impact on current Netflix customers won’t be clear for some time. To David Lewis in Norwalk, Connecticut, it’s doesn’t seem like a big deal. Lewis shares a premium plan with his three adult children and some of their friends and says they will keep it, even if they have to cut off the friends and each pay for their own accounts.

“We would keep Netflix and pay for the four in our family, even if it was more,” he said. “We love the service and what it offers.”

The Los Gatos, California, company estimated that about 100 million households worldwide are watching its service for free by using the account of a friend or another family member, including 30 million in the U.S. and Canada.

“Those are over 100 million households already are choosing to view Netflix,” Netflix CEO Reed Hastings said. “We’ve just got to get paid at some degree for them.”

To prod more people to pay for their own accounts, Netflix indicated it will expand a trial program it has been running in three Latin American countries — Chile, Costa Rica and Peru. In these locations, subscribers can extend service to another household for a discounted price. In Costa Rica, for instance, Netflix plan prices range from $9 to $15 a month, but subscribers can openly share their service with another household for $3.

Netflix offered no additional information about how a cheaper ad-supported service tier would work or how much it would cost. Another rival, Hulu, has long offered an ad-supported tier.

While Netflix clearly believes these changes will help it build upon its current 221.6 million worldwide subscribers, the moves also risk alienating customers to the point they cancel.

Netflix was previously stung by a customer backlash in 2011 when it unveiled plans to begin charging for its then-nascent streaming service, which had been bundled for free with its traditional DVD-by-mail service before its international expansion. In the months after that change, Netflix lost 800,000 subscribers, prompting an apology from Hastings for botching the execution of the spin-off.

Tuesday’s announcement was a sobering comedown for a company that was buoyed two years ago when millions of consumers corralled at home were desperately seeking diversions — a void Netflix was happy to fill. Netflix added 36 million subscribers during 2020, by far the largest annual growth since its video streaming service’s debut in 2007.

But Hastings now believes those outsized gains may have blinded management. “COVID created a lot of noise on how to read the situation,” he said in a video conference Tuesday.

Netflix began heading in a new direction last year when its service added video games at no additional charge in an attempt to give people another reason to subscribe.

Escalating inflation over the past year has also squeezed household budgets, leading more consumers to rein in their spending on discretionary items. Despite that pressure, Netflix recently raised prices in the U.S., where it has its greatest household penetration — and where it’s had the most trouble finding more subscribers.

In the most recent quarter, Netflix lost 640,000 subscribers in the U.S. and Canada, prompting management to point out that most of its future growth will come in international markets. Netflix ended March with 74.6 million subscribers in the U.S. and Canada.

KSL 5 TV Live

Top Stories

Entertainment

Alec Baldwin charged in Rust shooting...
Associated Press

Prosecutors file charges in set shooting by Alec Baldwin

Actor Alec Baldwin and a weapons specialist have been formally charged with involuntary manslaughter in the fatal shooting of a cinematographer on a New Mexico movie set, according to court documents filed by prosecutors Tuesday.
16 hours ago
R&B singer R. Kelly (L) arrives at the Cook County courthouse where jury selection is scheduled to ...
Claire Savage and Michael Tarm, Associated Press

Chicago prosecutor dropping R. Kelly sex-abuse charges

A Chicago prosecutor said Monday that she's dropping sex-abuse charges against singer R. Kelly following federal convictions in two courts that should guarantee the disgraced R&B star will be locked up for decades.
2 days ago
Amy Robach and TJ Holmes attend the 2022 ABC Disney Upfront at Basketball City - Pier 36 - South St...
Associated Press

TV anchors T.J. Holmes, Amy Robach leave ABC amid romance

T.J. Holmes and Amy Robach, anchors at the afternoon extension of ABC’s “Good Morning America,” are leaving the network.
2 days ago
Lisa Loring...
Toyin Owoseje and Amanda Watts, CNN

Lisa Loring, original Wednesday Addams actress, dead at 64

Lisa Loring, best known as the first actress to play Wednesday Addams in the original "The Addams Family" sitcom, has died at the age of 64.
2 days ago
Motown singer and songwriter Barrett Strong, here in 2004, has died. (Louis Lanzano/AP)...
Marianne Garvey and Amanda Watts

Barrett Strong, Motown singer and songwriter, dead at 81

Barrett Strong, one of Motown’s founding artists and most gifted songwriters who sang lead on the company’s breakthrough single “Money (That’s What I Want)” and later collaborated on such classics as “I Heard It Through the Grapevine" and “War,” has died.
2 days ago
Annie Wersching, seen here in 2019, has passed away. (Willy Sanjuan/Invision/AP)...
Chuck Johnston and Alli Rosenbloom

Annie Wersching, ’24’ actress, passes away at 45

Actress Annie Wersching passed away of cancer early Sunday morning, her publicist, Craig Schneider told CNN. Wersching was 45 years old.
3 days ago

Sponsored Articles

Fiber Optical cables connected to an optic ports and Network cables connected to ethernet ports...
Brian Huston, CE and Anthony Perkins, BICSI

Why Every Business Needs a Structured Cabling System

A structured cabling system benefits businesses by giving you faster processing speeds and making your network more efficient and reliable.
notebook with password notes highlighted...
PC Laptops

How to Create Strong Passwords You Can Actually Remember

Learn how you can create strong passwords that are actually easy to remember! In a short time you can create new ones in seconds.
house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 Reasons You May Want to Consider Apartment Life Over Owning a Home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to Choose What MBA Program is Right for You: Take this Quiz Before You Apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Diverse Group of Energetic Professionals Team Meeting in Modern Office: Brainstorming IT Programmer...
Les Olson

Don’t Let a Ransomware Attack Get You Down | Protect Your Workplace Today with Cyber Insurance

Business owners and operators should be on guard to protect their workplace. Cyber insurance can protect you from online attacks.
As shares plunge, Netflix takes aim at password sharing