Netflix considers ads as it works to address password sharing

Netflix is considering changes it has long resisted: Minimizing password sharing and creating a low-cost subscription supported by advertising.

This comes amid an unexpectedly sharp drop in subscribers. The changes, announced Tuesday, are designed to help the streaming giant regain momentum it’s lost over the past year.

Pandemic-driven lockdowns that drove binge-watching have lifted, while deep-pocketed rivals such as Apple and Walt Disney have begun to chip away at its vast audience with their own streaming services.

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During the January-March period, Netflix’s customer base fell by 200,000. The drop this year stemmed in part from the company’s decision to withdraw from Russia to protest the war against Ukraine, resulting in a loss of 700,000 subscribers.

Acknowledging its problems are deep, Netflix is also projecting a loss of another two million subscribers during the April-June period.

Last year, Netflix and other streaming giants joined together to discourage people from sharing account passwords, all while trying not to alienate subscribers.

At the time, it was estimated that password sharing cost services several billion dollars a year in lost revenue.

In March 2021, Netflix began testing out a way to crack down on the practice, using popups to ask some people to verify their account or do so later.

“This test is designed to help ensure that people using Netflix accounts are authorized to do so,” the company said in a statement.

Millions believed to be sharing passwords

The Los Gatos, California, company estimates about 100 million households worldwide are watching its service for free by using the account of a friend or another family member, including 30 million in the U.S. and Canada.

“Those are over 100 million households already are choosing to view Netflix,” Netflix CEO Reed Hastings said. “We’ve just got to get paid at some degree for them.”

To prod more people to pay for their own accounts, Netflix has indicated it will expand a trial program it has been running in Chile, Costa Rica, and Peru, where subscribers can extend service to another household for a discounted price.

In Costa Rica, Netflix plan prices range from $9 to $15 a month, but subscribers can openly share their service with another household for $3.

The company has so far not provided any details about how its proposed ad-supported accounts would work or what prices would look like.