Netflix’s enforcement of stricter rules against account-sharing has reportedly led to a significant drop in subscriptions in at least one country where these measures have been implemented.
According to data from market research firm Kantar, reported on Tuesday, Netflix lost over 1 million users in Spain during the first quarter of this year.
This decline coincided with Netflix’s introduction of a €5.99 monthly fee—approximately $6.57—for users who share their passwords with individuals in separate households.
Dominic Sunnebo, global insight director at Kantar’s Worldpanel Division, telling that this significant drop in subscriptions is clearly attributable to the crackdown.
Out of the more than 1 million users who stopped using Netflix during this period, about two-thirds had been using someone else’s password, based on the firm’s data.
While not all of these lost users were paying subscribers, Sunnebo noted that this decline could diminish the benefits Netflix typically gains from word-of-mouth promotion.
Reports indicate that subscription cancellations in Spain increased threefold during the quarter compared to the same period the previous year.
Netflix has postponed its planned crackdown on account-sharing in the U.S. from the first quarter to the second quarter. This delay is expected to shift some membership growth and revenue benefits from the second quarter to the third.
The company has faced backlash from users over its efforts to curb password-sharing as part of its strategy to generate additional revenue globally.
In February, Netflix extended its restrictions to Spain and three other countries—Canada, New Zealand, and Portugal.
In a recent letter to shareholders, Netflix stated it was “pleased with the results” of its expanded crackdown, despite acknowledging a “cancel reaction” in markets where these measures have been introduced.
The letter mentioned, “As with Latin America, we see a cancel reaction in each market when we announce the news, which impacts near-term member growth.
But as borrowers start to activate their own accounts and existing members add ‘extra member’ accounts, we see increased acquisition and revenue.”
Netflix executives pointed to Canada as a “reliable predictor for the US,” noting that its paid membership base there is now larger than before the restrictions were implemented.
The letter also noted, “As we roll out paid sharing—and as some borrowers stop watching either because they don’t convert to extra members or full paying accounts—near-term engagement, as measured by third parties like Nielsen, will likely shrink modestly.”
Netflix estimates that around 100 million households currently share their accounts.
Earlier this month, Netflix’s shares dropped after the company reported a shortfall in new paid subscribers compared to Wall Street’s expectations. Nevertheless, the stock has increased nearly 10% so far this year.
