Netflix claims dropping subscriber numbers are requiring them to implement harsh new changes. They’ve announced paywalls for multi-household accounts, and a new cheaper ad-supported tier.
According to Netflix, over 200,000 subscribers dropped the service during Financial Quarter One, which runs from January to March. And they’ve projected ten times that loss in the April-June quarter. The larger number includes most of the 700,000 Russian subscribers cut off by Netflix’s decision to cease doing business in Russia over their invasion of Ukraine.
The drops have shaken Netflix’s shareholders. After their announcement and projections on Tuesday, Netflix’s share price dropped by over 25 percent, wiping out approximately $75 billion in shareholder wealth.
Netflix claims that about 100 million households worldwide are ‘freeloading’ off the service, watching by using an account someone else is paying for.
”Those are over 100 million households already are choosing to view Netflix,” said Netflix CEO Reed Hastings. “We’ve just got to get paid at some degree for them.”
They have already been running a trial program in Latin America, where subscribers can extend service to another household for a small surcharge. For instance, in Costa Rica, where Netflix plans cost between $9 and $15 a month, adding a second household costs $3.
Many customers are bitter about the announcements, and for good reason. In 2020, Netflix added 36 million subscribers, and didn’t improve their service or lower their fees. In fact, they raised them while reporting record profits. But losing 2 million means everyone should pay even more, during a time of runaway inflation?
Netflix has not announced how they intend to police password-sharing, but it will have to account for factors like people who live in multiple households, who use their Netflix account at work or on the road, or divided families. Not accounting for these factors will open the company up to lawsuits from many angles, so hopefully they are taking it seriously.
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