Netflix aims to curtail password sharing, considers ads

SAN FRANCISCO - The Associated Press

An unexpectedly sharp drop in subscribers has Netflix considering changes it has long resisted: Minimizing password sharing and creating a low-cost subscription supported by advertising.

Looming changes announced late on April 19 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 erosion, coming off a year of progressively slower growth, has rattled Netflix investors. Shares plunged by more than 25 percent in extended trading after Netflix revealed its disappointing performance. Netflix shares could have lost more than half of their value so far this year, wiping out about $150 billion in shareholder wealth in less than four months.

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.