Netflix lost over 1 million users in Spain in Q1, 2023. The drop was seemingly caused by the streaming service's crackdown on password sharing.
The after effect of Netflix's password sharing crackdown in Spain
A few months ago, the Los Gatos company introduced an ad-supported tier called Basic With Ads plan in a few Countries. The company believed this would convince non-paying users, i.e. those who were watching the shows and movies on the platform using the password that was provided by their family member or friend. This limitation was just one step of its plan to curb the practice of password sharing, it had already introduced a way to remove devices remotely, and an option to transfer profiles to a new account.
The streaming giant recently brought a new rule into effect in some regions, which restricts playback to devices that are used at your home. It detects your IP Address, uses device identification, and account activity to determine your "home". Any device that it detects as located outside your home will be booted off, requiring "an extra member" payment for accessing the service. Adding a new member costs an additional €5.99 in Spain. For context, the lowest plan costs €5.49/month, which is actually €0.50 cheaper than adding an extra member.
Netflix changed the prices of its plans when it introduced its ad-supported plans, to make the entry-level plan more appealing for users. On a sidenote, the video on demand service has renamed its Basic with Ads plan recently, it is now called Standard With Ads. As Martin pointed out, the Standard With Ads plan is now better than the Basic ad-free plan, because it lets you watch in Full HD (1080p), and also supports streaming on 2 devices at the same time.
A study by Kantar, based on a survey that it had conducted, reveals that Netflix lost over 1 million users since January 2023. The service has 11.9 Million users in Spain, and the number fell by 292,000 from the previous quarter. That would mean around two-thirds of the users (out of 1 million), were non-paying viewers. Still, that's a pretty big chunk to lose. The study shows that cancellations have tripled in the last quarter, and that half of those users had said they would not pay for the service.
Dominic Sunnebo, global insight director at Kantar’s Worldpanel Division commented that this drop in numbers was clearly the result of the password sharing crackdown in Spain. Perhaps Netflix has underestimated the effect of banning password sharing, and needs to rethink its strategy. In an earnings call for the 1st quarter, the company had played down the issue, saying that it sees a cancel reaction in every market that the company had introduced it new member plan in. It had stated that its ad-supported plan and buy an extra option were successful in Canada, and that it expects similar results in the U.S. Netflix has added over a million users in the U.S. to its Standard with Ads plan already, but has pushed back its plans to crackdown on password sharing while it gets its location determination systems ready.
The research reveals that Sky Showtime had a successful launch in Spain, while Amazon Prime Video retained the top spot for adding new subscribers, a with 34% share. It also claims that over half of the subscribers who cancelled their Netflix subscription had an Amazon Prime account, and predicts the latter's numbers to grow in the coming quarters. In contrast, Kantar's analysis suggests that 10% of Netflix subscribers could cancel their plan in Q2, 2023.
Image courtesy: Kantar
Bloomberg quotes Netflix's findings, which had claimed over 100 Million users around the world use the streaming service without paying for it. Netflix had actively promoted password sharing in 2017. Ironical, isn't it? The streaming giant may not realize that a lot of people who subscribe to the Premium plan may actually be a group of users who pool in their money to collectively pay for the subscription. It's not just password sharing, it's a way to share the burden of payment. When Netflix bans devices from sharing the account outside a home, it becomes more expensive for these users, so they might ditch the service completely. This may be the reason why it lost so many subscribers in Spain.
Another research, the Barómetro TV-OTT by Barlovento Comunicación, suggests that Netflix could have lost over 2.5 million users in the 1st quarter of 2023.
Netflix's Standard plan allows you to stream on up to 2 supported devices simultaneously, while the Premium plan lets you watch on 4 devices at a time. If you are already paying for watching on multiple screens, does it really matter if the devices that used for accessing the service are under one roof?
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