You might be wondering why a company like Netflix is losing $1.6 Billion every year when it’s the uncrowned king in the market. Well, turns out that it’s the password sharing issue costing Netflix around $405 million per quarter.
Netflix isn’t the only streaming service that is affected by the password sharing problem, its competitor Hulu is making a similar loss. While Netflix has been aware of the issue since long, it is still only monitoring the issue and does not have any solid plans to take action against the problem.
Even though as per a survey from Magid for CNBC it is only 10% of the customers that are involved in password sharing, it converts to around 13.7 million people not paying the $9.95 per month subscription fee, which means the company is losing around $137 million every month in potential revenues.
While Netflix content production costs are only increasing as competition is getting stiff in the streaming industry. It is also investing heavily on new features which would lead to old devices not being able to cope up with the advancements, which again could lead to backlash from users. Netflix’s long term debt would rise over $14 Billion.
As of now, Netflix has hiked its pricing plan rather than imposing a crackdown to recover revenues.
Executives at Netflix say that a crackdown on password sharing could help or hurt the company, and they would prefer to use customer friendly strategies rather than straight away cracking down password sharing. Of course at such a crucial time the company would not want its customers to move away to a different platform.
Netflix CEO, Reed Hastings commented on the issue back in 2016,
“Password sharing is something you have to learn to live with, because there’s so much legitimate password sharing like, you know, you sharing with your spouse, with your kids, so there’s no bright line and we’re doing fine as is.”