The Blubber

Market research group Kantar has reported that Netflix Inc. experienced a significant decline in its user base in Spain during the first quarter of 2023, losing over one million users. The drop in users is believed to be a consequence of the streaming service's efforts to curb password-sharing among subscribers.

In February 2023, Netflix implemented a new policy in Spain, introducing a monthly fee of €5.99 ($6.57) for users who shared their account login details with individuals from different households. The company also introduced technical measures to identify instances of account sharing. Kantar's research, which is based on surveys of household streaming behaviors, suggests that this policy change contributed to the loss of over a million users, two-thirds of whom had been using someone else's password.

Dominic Sunnebo, global insight director at Kantar's Worldpanel Division, emphasized the impact of the decline, stating, "It's clear this steep drop is due to the crackdown." Sunnebo noted that even though many of the lost users were not paying subscribers, their departure could negatively affect word-of-mouth recommendations for Netflix's shows and services.

Kantar's research also revealed a significant increase in subscription cancellations during the first quarter, with cancellations tripling compared to the previous period. Additionally, one-tenth of the remaining Netflix subscribers in Spain indicated their intention to cancel their subscriptions in the second quarter.

Netflix has introduced similar fees to discourage password-sharing in other countries, including Portugal, Canada, and New Zealand, following tests in several Latin American nations. According to Netflix, over 100 million people worldwide use accounts for which they do not pay, although the company has not provided a country-specific breakdown of this figure.

Despite missing expectations for new subscriber growth in the first quarter, Netflix remains optimistic about its future prospects. The company believes that its password-policing initiative, along with the introduction of a cheaper ad-supported streaming option, will drive growth in the latter half of 2023.