OSLO / NEW YORK (Nettavisen): For the first time in over ten years, the streaming service Netflix has reported a decline in the number of subscribers, and on Wednesday the stock will be shredded on Wall Street.
The company now warns users who log in for free. Netflix has previously looked through the fingers of password sharing, since this has also contributed to the growth of the service. But the loss of subscribers is accelerating measures to stop the widespread practice, Netflix warns in a letter to shareholders.
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This could mean, for example, that your son’s friends will end up borrowing your Netflix password or that the login will be spread in student groups.
according to cnbc.com Netflix estimates that borrowed passwords are used by more than 30 million households in the United States and Canada, and more than 100 million globally. The American website quotes a letter to the shareholders, in which Netflix acknowledges that the spread of passwords has not been deliberately cracked down on before.
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One in three share passwords
With the growing competition from, among others, Disney Plus, Apple TV + and Paramount, the picture has changed. Now Netflix wants users to start paying if the service is used outside the household that has paid the subscription.
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Password sharing took off during the pandemic, writes the Daily Mail. People aged 18 to 24 in particular became widespread, according to the research company Advertising Research Foundation, which explains the practice of combining a lot of free time and bad advice.
It is estimated that as many as 36 percent of Netflix users share their password with at least one family member and 13 percent with a friend they do not live with, and Disney + subscriptions are shared about the same amount, writes the Daily Mail.
The power giant recently raised the price of its monthly subscriptions by 1.50 – 2 dollars.
Announces tightening next year
According to an analysis by Citigroup, quoted in the Daily Mail, password sharing costs streaming services about $ 25 billion (220 billion kroner) per year in lost revenue, of which Netflix is estimated to account for $ 6.25 billion (NOK 55 billion).
“Our relatively high impact on households, combined with competition, goes beyond revenue growth. The division of accounts as a share of paid subscriptions has not changed significantly over the years, but combined with the first factor, subscriber growth is affected in many markets – the growth during the pandemic overshadowed this point “, writes Netflix in the letter as quoted by cnbc.com.
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The company reported a decline of 200,000 subscribers in the first quarter, and estimated a further decline of 2 million subscribers in the second quarter. Globally, Netflic has 222 million subscribers.
Cnbc writes that Netflix this winter has tested methods for stopping password sharing in Chile and Peru, among other places. The company has not announced a concrete plan for how this will be solved globally, but suggests that there may be changes in 2023.
– It’s shocking
Speculation that Netflix is now considering opening up ads on the platform and that it will limit the sharing of passwords is causing more analysts to react. In addition, Netflix also warns that they will slow down the production of movies and series as a result of the decline in the number of subscribers.
– It is simply shocking. Everything they have tried to convince me of in the last five years was given up in a quarter, says analyst Moffett Nathanson in MoffettNathanson LLC to Bloomberg.
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Plunges on the stock market
The numbers from Netflix were extremely poorly received when they came late Tuesday night Norwegian time. In pre-trade on Wednesday, Netflix was down as much as 26 percent. And 45 minutes after Wall Street opened on Wednesday afternoon Norwegian time, the share was down as much as 38 percent.
Netflix has received a real beating on the stock exchange in recent months, and in November 2021, the share value of Netflix was just over 700 dollars. On Wednesday after the stock market opened, the value per share was only 217 dollars.
according to CNBC As many as nine companies on Wall Street have downgraded Netflix stock after the disappointing numbers.
Bloomberg reports that Netflix is now set to lose as much as 530 billion Norwegian kroner in value.
Several other power companies are also experiencing a downturn on Wednesday pending investors waiting for updates on their growth, writes CNBC.
Disney was down 5 percent on Wednesday, Roku was down 7 percent, Paramount was down 12 percent, while Warner Bros. was down. Discovery was also down 5 percent.
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