Netflix Loses Subscribers for First Time in a Decade

Shares of the streaming provider fell by more than 25% following the report.

Password Sharing Shares the Blame

Netflix reported a loss of more than 200,000 paid users for the first quarter of the year on Tuesday. This is the first time that the company has experienced a decline in subscribers in over 10 years. 

The report strikes a sharp contrast with its earlier forecastto shareholders. Netflix had projected an increase in its paid user base in the first three months by 2.5 million. Analysts were of a similar opinion, pointing toward an increase closer to 2.7 million.

The company is blaming the decline on a number of factors, among which is account sharing by users.

“Our revenue growth has slowed considerably,” the company informed shareholders. “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating growth headwinds.”

41% of Netflix users enjoy the service without paying a subscription. A breakdown of that figure shows that 14% watch using shared passwords.

Netflix CEO Reed Hastings has been vocal in the past about his aversion to taking the ad-supported route. However, the company may be heading the way of rivals Disney+ as it looks to tackle falling numbers.

"Those who have followed Netflix know that I've been against the complexity of advertising, and a big fan of the simplicity of subscription," he said. "But, as much as I'm a fan of that, I'm a bigger fan of consumer choice."

Shares Plummet 

The report sent out on Tuesday had a devastating effect on Netflix’s share price. The company’s stock fell as low as 25% in extended hours as a result of the loss reveal.

Netflix expects a further loss of two million users in the second quarter.