Citing ongoing downward subscriber growth trends, Netflix April 19 said it believes that 100 million non-paying households worldwide, including 30 million homes in North America, are using the service without paying for it. While password sharing isn’t new among Netflix subs, with membership growth declining, the practice is now in the crosshairs of Netflix management.
In the quarterly newsletter, co-CEOs Reed Hastings and Ted Sarandos, along with CFO Spence Neumann, said the number of unauthorized users represents an opportunity for the company.
“This is a big opportunity as these households are already watching Netflix and enjoying our service,” the executives wrote. “Sharing likely helped fuel our growth by getting more people using and enjoying Netflix. And we’ve always tried to make sharing within a member’s household easy, with features like profiles and multiple streams.”
At the same time, the increased practice of account sharing, according to the executives, has created confusion about when and how Netflix can be shared with other households. As a result, the streamer is now testing in Latin America the ability for subscribers to share passwords with non-paying third parties at a reduced subscription rate.
“There’s a broad range of engagement when it comes to sharing households from high to occasional viewing,” Netflix wrote in the letter. “So, while we
won’t be able to monetize all of it right now, we believe it’s a large, short-to mid-term opportunity.”
Hastings, Sarandos and Neumann wrote that focusing on average revenue per subscriber and viewing hours is now a better judge of Netflix’s appeal.
“Revenue and viewing will become more important indicators of our success than membership growth,” they wrote.