Netflix’s bold move to crack down on password sharing has backfired in Spain, with a loss of one million users during the first quarter of 2023. According to a new report by market research group Kantar, this translates to a 15% decrease in its total users in the country. The streaming platform had introduced new measures in February, which required a €5.99 monthly fee from users who shared their passwords with other households. The decline in the country’s user base is directly linked to this move, says Kantar.
Out of the one million users who opted out of Netflix, two-thirds were benefiting from password sharing, while one-third were actually paying for the account. This means a loss of subscribers and revenue. The study also found that subscription cancellations nearly tripled in the first quarter of this year compared to the previous period, and 10% of Spain’s remaining subscribers plan to cancel their plan in the second quarter of 2023.
As competition in the country heats up, Amazon Prime Video and Sky Showtime have seen an increase in subscriptions, with 34.4% and 32.6% respectively.
While Netflix has implemented its new password policy measures in Portugal, Canada, and New Zealand, following testing in several countries in Latin America, the loss of one million users in just over a month in Spain has major implications for the company. Netflix has estimated that over 100 million households are sharing a password, and its COO and CPO, Gregory Peters, said during the latest earnings call that their goal is to convert many of those folks to be paid accounts or have the account owner pay for them.
However, there are inherent risks with clamping down on password sharing, particularly when back in 2017 Netflix was seen to be actively encouraging it, says Dominic Sunnebo, Global Insight Director at Kantar’s Worldpanel Division. He added that losing over one million users in a little over a month has major implications for Netflix and whether it decides to continue with its crackdown globally.
Although Netflix has fallen off its targets for new subscribers in the first quarter of 2023, the company believes that the new password policy in combination with cheaper add-based subscriptions will boost growth in the second half of the year. It remains to be seen whether Spain’s user decline is just a short-term pitfall or a clear indication that Netflix’s plan will cost it even more subscribers.