Netflix's Password Sharing Crackdown Is Already Causing it Major Trouble

The churn is real, and it's big enough to get its own name at the company.

Last year, Netflix announced it would begin cracking down on password sharing in a number of countries, including Canada, New Zealand and Portugal.

So how’s that working out?

Not great!

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For years, Netflix  (NFLX) - Get Free Report had a very laissez faire attitude about password sharing. Part of it was strategic, in that if a parent let their college-aged son use their password, they would eventually sign up for their own account once they got a job. After all, the more people who use Netflix, then the more people who talk about Netflix. It’s all about product sampling, at the end of the day.

But it’s also the case that Netflix wanted to project a cool, youthful persona, as seen by the below Tweet. 

Then Netflix had its worst year ever in 2022, losing 200,000 subscribers in the first quarter, and almost 1 million in the second. And so the cutbacks came. Now the company was on a mission to get its stock numbers and subscriber counts back-up.

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.”

And a big reason for that, executives admitted, was “cancel reaction in each market when we announce the news” about the password crackdown. And now we have a clearer understanding of just what that “cancel reaction” looks like.

In the quarter of 2023, according to market research group Kantar, Netflix lost 1 million users in Spain, “reflecting the effects of the company's crackdown on password-sharing.” This is triple the normal amount of churn rate (industry speak for people who cancel their subscriptions).

In February, the company introduced a €5.99 ($6.57) monthly fee for users in Spain who shared their log-in details with another household. 

Of course, maybe part of the problem is that, in addition to the password-sharing fees, Netflix keeps losing all of its shows?