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Netflix loses 1 million users in Spain amid password sharing crackdown, data reveals

Netflix lost more than 1 million users in Spain as it rolled out its password sharing crackdown in the country, according to new research from market analytics company Kantar. Read More...

Netflix (NFLX) lost more than 1 million users in Spain as it rolled out its password-sharing crackdown in the country, according to new research from market analytics company Kantar.

The data, which examined subscription trends from the first three months of the year, found that out of the 1 million-plus users who left the platform, two-thirds were sharing passwords, with the number of cancellations tripling compared to the year-ago period.

Netflix, which broadened its crackdown in early February to include countries like Canada, New Zealand, Portugal, and Spain, in addition to the test countries of Chile, Costa Rica, and Peru, revealed it’s planning “a broad rollout” of the policy this quarter that will include the U.S.

The company previously said it expected short-term churn before users signed up for their own accounts, writing in its latest quarterly letter to shareholders: “In Canada, which we believe is a reliable predictor for the U.S., our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the U.S.”

However, Kantar’s data suggests there could be more churn to come, revealing 10% of remaining Netflix subscribers in Spain say they plan to cancel their plan in Q2 — well above the average seen in previous quarters.

London, UK - July 31, 2018: The buttons of the streaming app Netflix, surrounded by BBC iPlayer, Speedtest, News and other apps on the screen of an iPhone.

London, UK - July 31, 2018: The buttons of the streaming app Netflix, surrounded by BBC iPlayer, Speedtest, News and other apps on the screen of an iPhone.

London, UK – July 31, 2018: The buttons of the streaming app Netflix, surrounded by BBC iPlayer, Speedtest, News and other apps on the screen of an iPhone.

“Some users were expected to be lost in the process, but losing over 1 million users in a little over a month has major implications for Netflix and whether it decides to continue with its crackdown globally,” said Dominic Sunnebo, global insight director at Kantar’s Worldpanel Division. “Monitoring the next few quarters to see how many of these consumers decide to re-subscribe will be vital to Netflix’s strategy in this space.”

The company had said it plans to learn from each rollout, revealing it’s “pleased with the results” so far — despite a “cancel reaction” in the majority of impacted markets.

“While we could have launched [paid account sharing] broadly in Q1, we found opportunities to improve the experience for members,” the company wrote in the shareholder letter. “We learn more with each rollout and we’ve incorporated the latest learnings, which we think will lead to even better results.”

Wall Street analysts have remained upbeat about the initiative, emphasizing its role as a longer-term growth driver, along with the platform’s recently launched ad-supported tier.

“We expect a lot of noise in 2Q23, and are being very conservative in our own modeling of churn in response to password crackdown,” Jefferies wrote in a note to clients earlier this month.

“However, we believe most of that churn will be somewhat impulsive, as it has minimal impact on the existing subscriber, and those members will return to the service over the course of 2023.”

Jefferies recommends “buying any dip associated with a conservative 2Q23 guide,” adding Netflix is poised to be the number one distributor in video content amid those longer-term revenue drivers while discipline around content spend will “jumpstart” margin and free cash flow expansion efforts.

Netflix shares are up 10% year-to-date and have soared more than 70% compared to the year-ago period.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]

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