When the Covid lockdowns started, Netflix experienced a significant increase in growth. After many of the lockdowns ended, the company has had to admit they must crack down on password sharing in order to keep their numbers up. Many consumers have shared their accounts with friends and family members over the years. Due to the large amount of password sharing, the company is changing its policies to prevent people from doing that.

Netflix revealed that from the last quarter to now, the streamer lost 200,000 subscribers. However, the numbers need to be provided with context. The company really lost 700,000 customers largely due to the suspension of services in Russia because of the invasion of Ukraine. On the flip side, Netflix gained 500,000 subscribers during the same period. With the increase and decrease, the corporation had a net loss of 200,000 consumers.

Subscriber Numbers Were a Disappointment for Netflix

Netflix

The numbers were a disappointment for Netflix. Initially, the company expected to gain 2.5 million subscribers during the quarter. Instead of a substantial gain, the company went through a pretty hefty loss. Estimates were off by a factor of 2.3 million. The result was far lower than previous predictions.

The future is not looking good, either. Right now, Netflix believes it will lose 2 million customers in the next quarter. For comparison, the streaming service gained 1.5 million people at the same point last year.

Recently, Netflix wrote a letter to shareholders related to the company's potential growth. The letter reads:

"However, our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds. The big COVID boost to streaming obscured the picture until recently. While we work to reaccelerate our revenue growth - through improvements to our service and more effective monetization of multi-household sharing - we’ll be holding our operating margin at around 20%."

Reasons for the lack of gains include the sharing of accounts, as well as the high level of competition from other streaming services. With sharing, many consumers are watching Netflix titles without paying. Applications such as, Disney+, HBO Max, Hulu, Amazon Prime, and AppleTv+ have given Netflix a run for their money. There are far more competitors today than there were when Netflix first entered the streaming industry.

The letter goes on to discuss the monetization of sharing. The letter continues:

"Early last year we started testing different approaches to monetize sharing and, in March, introduced two new paid sharing features, where current members have the choice to pay for additional households, in three markets in Latin America. There’s a broad range of engagement when it comes to sharing households from high to occasional viewing. 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."

There was some positive news for Netflix. The company had a 10% increase in revenues year-over-year. Expectations are for the streamer to have another 10% revenue gain in the next quarter. However, changes will be made to ensure subscriber numbers do not plummet further than they already have.