Netflix lost 1 million users in Spain over password crackdown

Netflix’s crackdown on user account-sharing has reportedly seen subscriptions plunge in at least one of the countries where it has rolled out its stricter rules.

The streaming giant has lost more than 1 million users since its crackdown in Spain during the first three months of this year, according to data compiled by market research firm Kantar and reported by Bloomberg on Tuesday.

The exodus of users coincided with Netflix’s move to introduce a €5.99 monthly fee — the equivalent of about $6.57 — for users who are found to be sharing their passwords with a separate household, the report said.

“It’s clear this steep drop is due to the crackdown,” Dominic Sunnebo, global insight director at Kantar’s Worldpanel Division, told Bloomberg.

Of the more than 1 million users who stopped watching Netflix during the period, about two-thirds had been using someone else’s password, according to the firm’s data.

While not all of the lost users were paying subscription fees, Sunnebo said the drop could limit benefits from word-of-mouth promotion of Netflix.

The number of subscription cancellations in Spain reportedly “tripled” during the quarter compared to the same three-month period one year earlier.

Netflix said it would delay a long-awaited crackdown for US users from the first quarter to the second — a change that will shift “some of the membership growth and revenue benefit” from the second quarter to the third.

The company has faced criticism from users for cracking down on password-sharing as it looks to drive additional revenue across its global business.

In February, the company expanded its restrictions to Spain and three other countries — Canada, New Zealand and Portugal.

In a letter to shareholders earlier this month, Netflix said it was “pleased with the results” of its expanded crackdown — even as it admitted to seeing a “cancel reaction” in markets where it has announced the move.

“As with Latin America, we see a cancel reaction in each market when we announce the news, which impacts near term member growth,” the letter said. “But as borrowers start to activate their own accounts and existing members add ‘extra member’ accounts, we see increased acquisition and revenue.”

Company executives cited the example of Canada, which they see as a “reliable predictor for the US,” and noted that its paid membership base is “now larger” than it was before the restrictions.

“As a reminder, as we roll out paid sharing — and as some borrowers stop watching either because they don’t convert to extra members or full paying accounts — near term engagement, as measured by third parties like Nielsen, will likely shrink modestly,” the letter added.

Netflix has said about 100 million households currently share their accounts.

Earlier this month, Netflix shares sank after its number of new paid subscribers fell short of Wall Street’s expectations.

The stock is up nearly 10% so far this year.