Netflix Changes Its Tune on Password Sharing

The embattered streaming giant pumps the breaks amid a weaker than expected quarterly report.

The good news for Netflix is that after a rough 2022, in which it lost 200,000 subscribers in the first quarter, and almost 1 million in the second, the company is slowly starting to rebound. It regained some customers at the end of last year, as well as the quarter of this year.

The bad news for Netflix is that its rebound is not as robust as the company would no doubt like. 

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During a recent earnings call, Netflix reported a net increase of 1.75 million global streaming subscribers, up nearly 5% from the same period in the prior year, but as noted by CNN, that’s well “below the more than 3 million Wall Street analysts had expected.”

The reasons for Netflix’s  (NFLX) - Get Free Report troubles are a subject of debate, but it’s likely a combination of too much competition in the streaming industry, people making cuts in their budget due to inflation, and a growing sense that Netflix is losing too much of its back catalog and doesn’t have enough quality originals.

But in the earnings call, executives also admit that part of the reason for the slow growth is an adverse reaction to the company’s decision to cut back on password sharing. For years, Netflix basically turned a blind eye to people using their ex’s password, or a family sharing an account even though they don’t live in the same household anymore.

Netflix began cracking down in Canada, New Zealand, Portugal, and several other areas in Latin America, and executives admit it has seen a “cancel reaction in each market when we announce the news.” But while some members canceled their account, the company also reports that it also saw “increased acquisition and revenue.”

Originally, Netflix decided to expand its password-sharing crackdown more broadly in the first quarter of this year, but delayed this move after it “found enough improvement opportunities” from early launches. But the company still intends to initiate the policy this year.

Netflix reported revenue of around $8.2 billion for the quarter, but it also recently got in trouble for its botched attempts to livestream a “Love is Blind” reunion special. As ever with Netflix these days, it’s always a mixed bag.