The company blamed password sharing, competition from online services such as Disney+ and Prime Video, and the decision to halt service in Russia. But the password sharing bit is perhaps the most interesting.
Look at what Netflix said in its first-quarter earnings letter to shareholders:
“First, it’s increasingly clear that the pace of growth into our underlying addressable market (broadband homes) is partly dependent on factors we don’t directly control, like the uptake of connected TVs (since the majority of our viewing is on TVs), the adoption of on-demand entertainment, and data costs. We believe these factors will keep improving over time, so that all broadband households will be potential Netflix customers. Second, in addition to our 222m paying households, we estimate that Netflix is being shared with over 100m additional households, including over 30m in the UCAN region. Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor, means it’s harder to grow membership in many markets - an issue that was obscured by our COVID growth.”
And in a video regarding the first-quarter earnings, Netflix co-CEO Reed Hasting said the following:
“We’re working on how to monetize sharing. . . . You know, we’ve been thinking about that for a couple years. But you know, when we were growing fast, it wasn’t the high priority to work on. And now we’re working super hard on it. Remember, these are over 100 million households that already are choosing to view Netflix. They love the service. We’ve just gotta get paid in some degree for them.”
Netflix COO and CPO Greg Peters also said in the video: “If you’ve got a sister that’s living in a different city, you want to share Netflix with her, that’s great. . . . We’re not trying to shut down that sharing. But we’re going to ask you to pay a bit more to be able to share with her so she gets the benefit and the value of the service but we also get the value of the revenue associated with that viewing”.
