(Bloomberg) — Netflix Inc. lost more than one million users in Spain in the first three months of 2023 according to market research group Kantar, a sign that the streaming giant’s crackdown on password-sharing could backfire.
Most Read from Bloomberg
In early February, Spain became one of Netflix’s first markets to introduce a monthly fee for users who shared their log-in details with another household and technical measures to detect such sharing. The move was linked to a fall in users of more than a million, two thirds of whom were using someone else’s password, according to Kantar’s research, which is based on surveys of household streaming habits.
“It’s clear this steep drop is due to the crackdown,” said Dominic Sunnebo, global insight director at Kantar’s Worldpanel Division, adding that the loss of a million users, even if most weren’t paid subscribers, would be a blow to Netflix in terms of word of mouth recommendation for its shows and service.
Subscription cancellations in the first quarter tripled compared to the previous period, according to Kantar’s research. Of all remaining Netflix subscribers in Spain, one-tenth said they planned to unsubscribe in the second quarter.
Spanish subscribers are charged €5.99 ($6.57) a month to add members outside their household. A similar fee was introduced in Portugal, Canada and New Zealand after a roll-out in several Latin American countries.
“We see a cancel reaction in each market when we announce the news,” Netflix said in its first quarter earnings release on April 18, expecting the dip to be momentary before users that didn’t pay start signing up for their own accounts. “In Canada, which we believe is a reliable predictor for the US, 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 US,” Netflix said.
Globally, more than 100 million people use an account they don’t pay for, according to Netflix. The company doesn’t break this figure down by country.
Last week Netflix missed expectations for new subscribers in the first quarter, but the company said that the password-policing plan and a cheaper streaming version with ads will accelerate growth in the second half of 2023.
Netflix’s investment in Spanish language content seems to be paying off. In the first three months of 2023, two of the five most watched series in Spain were available to stream on Netflix, according to Kantar. The company opened its first European production hub in Madrid in 2019, a facility that had doubled in size by the end of last year.
(Updates with context in second paragraph and comment from Netflix in the sixth paragraph)
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.