Netflix loses 450,000 subscribers in Latin America, the biggest shrinkage in a year

By Isabela Fleischmann and Filipe Serrano

Netflix lost 450,000 subscribers in Latin America in the first quarter of 2023, according to the company’s results released on Tuesday (18).

It’s the first subscriber drop in the region since the quarter ended in March 2022, when the company had lost 351,000 subscribers.

Latin America is the only region of Netflix’s operations with net losses of paying users in the first three months of this year.

The downturn, however, comes after the company performed strongly in Q4 2022 with the addition of 1.7 million subscribers in Latin America.

The region had 41.2 million paid subscriptions at the end of March 2023.

Regarding sales, Latin American countries represented revenue of US$1.07 billion in the first quarter (13% of the total), with a 7% growth compared to the same period last year, when the company had revenues of US$998 million.

Despite the positive financial result, the retraction in the number of users in Latin America contributed to the company’s weaker global result.

According to Bloomberg, Netflix added 1.75 million subscribers in the first quarter, a number that fell short of financial market analysts’ expectations, which estimated growth of 2.41 million.

The streaming service had 232.5 million paid subscribers worldwide at the end of March.

In addition to weaker growth, Netflix predicted it would have lower sales and profits than analysts had estimated in the second quarter of this year, raising investor concerns about the streaming company’s future.

After the results were announced, Netflix shares fell as much as 12% to US$294.80 in after-market trading.

This is the second year in a row that Netflix has had a shaky start.

CHARGING FOR PASSWORD SHARING

One of Netflix’s bets to improve financial results is an additional charge for subscribers to share their passwords with other service users, such as family or friends.

The service was tested last year in Chile, Peru, and Costa Rica and debuted in February in Canada, Portugal, Spain, and New Zealand.

Brazil is not yet among the countries that have the additional charge.

Netflix estimates that about 100 million people worldwide (just under half of all subscribers) use shared passwords.

The company, betting that paying for account sharing would increase its revenue, said it is pleased with the outcome of the service’s launch, despite an initial backlash from users to cancel the service.

“As in Latin America, we saw a cancellation reaction in each market when we announced the novelty, which impacts member growth in the short term,” the company said in a document to shareholders.

However, the streaming giant believes that as “password lenders” begin to activate their accounts and existing subscribers add “extra member” accounts, the company will see an increase in user acquisition and revenue.

“In Canada, which we believe is a reliable mirror to the US, our paying member base is now larger than before the launch of paid sharing, and revenue growth has accelerated and is now growing faster than in the United States,” the company said.

Netflix also said that some “password lenders” may stop accessing the service as it adopts paid password sharing. Short-term viewership, as measured by companies like Nielsen, “will likely decline modestly.”

“However, we believe the pattern will be similar to what we have seen in Latin America, with engagement growth resuming over time as we continue to improve our programming and password lenders sign up for their accounts,” the Netflix statement said.

With information from Bloomberg