Netflix’s crackdown on account sharing has reportedly led to a drop in subscriptions in at least one of the countries where it rolled out its tougher rules.
The streaming giant has lost more than 1 million users since its crackdown in Spain in the first three months of this year, according to data compiled by market research firm Kantar and reported by Bloomberg on Tuesday.
The user exodus coincided with Netflix’s move to introduce a €5.99 monthly fee — the equivalent of about $6.57 — for users who share their passwords with another household, the report said.
“It’s clear that this steep decline is due to the crackdown,” Dominic Sunnebo, global insight director at Kantar’s Worldpanel division, told Bloomberg.
Of the more than 1 million users who stopped watching Netflix during that period, about two-thirds had used someone else’s password, according to the company.
Although not all of the lost users paid subscription fees, Sunnebo said the drop could limit the benefits of Netflix’s word-of-mouth promotion.
The number of subscription cancellations in Spain is reported to have “tripled” during the quarter compared to the same three-month period a year earlier.
Netflix said it would move a long-awaited crackdown on US users from Q1 to Q2 — a change that will shift “some of the membership growth and revenue benefit” from Q2 to Q3.
The company has been criticized by users for cracking down on password sharing as it seeks to generate additional revenue from its global business.
In February, the company extended its restrictions to Spain and three other countries – Canada, New Zealand and Portugal.
In a letter to shareholders earlier this month, Netflix said it was “pleased with the results” of its expanded move — although it admitted to seeing a “cancellation reaction” in markets where it announced the move.
“As in Latin America, we are seeing an exit reaction in every market when we announce the news, impacting near-term membership growth,” the letter reads. “But as borrowers start activating their own accounts and existing members add ‘additional member accounts,’ we see an increase in acquisition and revenue.”
Company executives cited the example of Canada, which they see as a “reliable indicator for the US,” noting that the paid member base is “larger now” than before the restrictions.
“As a reminder, if we roll out paid sharing — and some borrowers stop watching because they either don’t convert to additional members or full-paying accounts — short-term exposure, as measured by third-party providers like Nielsen, will likely shrink slightly.” ‘ the letter added.
According to Netflix, around 100 million households currently share their accounts.
Earlier this month, Netflix shares fell after new paying subscribers fell short of Wall Street expectations.
The stock is up nearly 10% so far this year.