Over 100 million households across the world are watching Netflix without directly paying for the service, due to widespread account sharing.
The streaming service highlighted the problem yesterday, as it presented another rough second quarter (Q2) earning report, which revealed plummeting subscriber numbers.
In the period, Netflix lost almost one million subscribers, which Parrot Analytics says is the first quarter in which Netflix’s six main competitors have a combined demand share (45.1%) that is higher than Netflix’s (41.2%).
Netflix’s six primary competitors in demand for original content are Amazon Prime Video, Disney+, HBO Max, Apple TV+, Hulu and Paramount+.
Account sharing has become a major headache for streaming services globally, with many moving to put an end to the practice of password sharing.
Earlier this month, MultiChoice South Africa CEO Nyiko Shiburi revealed the video entertainment company is working to reintroduce the practice of password sharing among its customers, as long as the users are in the same location.
Yesterday, Netflix also blamed its slowing growth on account sharing, connected TV adoption, competition and macro factors, such as sluggish economic growth and the impact of the war in Ukraine.
To rescue the company, Netflix is now seeking to convert the 100 million non-paying viewers into paying customers, as it implements a raft of measures to turn around its fortunes.
“In the near-term, a key priority to re-accelerate revenue growth is to evolve and improve our monetisation,” Netflix said in a letter to shareholders.
“We’re in the early stages of working to monetise the 100 million-plus households that are currently enjoying, but not directly paying for, Netflix. We know this will be a change for our members. Our goal is to find an easy-to-use paid sharing offering that we believe works for our members and our business that we can roll out in 2023.”
Netflix says it has launched two different approaches to convert non-paying households, based on its experience of controlling the account sharing problem in Latin America.
“We’ve been carefully exploring different ways for people who want to share their account to pay a bit more. In March 2022, we launched an ‘add extra member’ feature in Chile, Costa Rica and Peru. From next month, we will launch an alternative ‘add a home’ feature in Argentina, the Dominican Republic, El Salvador, Guatemala and Honduras,” says Chengyi Long, Netflix director, product innovation, in a statement.
Further, the company says it needs to continue to improve all aspects of Netflix, including content, marketing and product experience.
On content, Netflix says it is building on its lead in non-English programming, and wants to be relevant to audiences all over the globe.
“Our local language titles are a differentiator for us. We focus first on telling authentic stories for local impact, but we see that great stories can travel everywhere.”
Going forward, Netflix says it will focus on better “monetising usage through both continued optimisation of our pricing and tiering structures, as well as the addition of a new, lower-priced, ad-supported tier”.
“Our lower-priced, advertising-supported offering will complement our existing plans, which will remain ad-free.”
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