In a letter to shareholders on April 19th, Netflix announced that it will be cracking down on US password sharing by the end of June 2023.
The company’s second quarter of the financial year will see a broad rollout of paid sharing, which means that people who are not living in the same household but are sharing login details will be required to pay.
Netflix had long been seen as the winner in the so-called streaming wars until its 2022 second quarter earnings report in April when its leading track record hit an inflection point.
The streaming giant lost subscribers for the first time after what had been a decade-long ascension. Markets reacted swiftly with a 60% drop in the company’s stock value, wiping out more than $54.4bn from the company’s market capitalisation.
In addition, while the company added 8.3 million subscribers in the last three months of 2021, bringing total subscriber growth for the year to 18.2 million, it was the lowest annual subscriber gain since 2016.
To address flagging growth, Netflix has been trialling a number of initiatives, including a cheaper subscription option with ads and crackdowns on password sharing. The company reported that it was “pleased with the results” from its expanded trial of paid password sharing, which began in February.
The Los Gatos, California, headquartered company reported revenues of $31.6bn for the fiscal year ended December 2022, an increase of 6.5% over 2021. In 2022, the company’s operating margin was 17.8%, compared to an operating margin of 20.9% in 2021. In 2022, the company recorded a net margin of 14.2%, compared to a net margin of 17.2% in 2021.
The crackdown on password sharing is a significant move for Netflix as it seeks to drive growth and protect its revenue streams.
With the company facing increasing competition from other streaming services, such as Disney+, Amazon Prime Video, and HBO Max, it is clear that Netflix needs to find ways to stay ahead in the streaming game. The paid sharing initiative is just one of the strategies that Netflix is employing to maintain its position as the leading streaming platform.