Netflix has seen a large drop in subscribers in the first quarter of 2022, which has prompted the streaming service to consider creating a low-cost subscription supported by advertising and bringing an end to password sharing.

The changes announced late on Tuesday (April 19) are designed to help Netflix regain momentum it lost over the past year.

Pandemic-driven lockdowns that drove binge-watching have lifted while deep-pocketed rivals such as Apple and Walt Disney began have chipped away at its vast audience with their own streaming services.

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Netflix’s customer base fell by 200,000 subscribers during the January-March quarter, the first contraction since the streaming service became available throughout most of the world six years ago.

The drop stemmed in part from Netflix’s decision to withdraw from Russia in protest of the war against Ukraine, resulting in a loss of 700,000 subscribers.

A more dramatic loss of another two million subscribers in the current April-June quarter has been projected by Netflix.

The erosion, coming off a year of progressively slower growth, has rattled another key constituency for Netflix — its shareholders. After revealing its disappointing performance, Netflix shares plunged by more than 25% in extended trading.

If the stock drop extends into Wednesday’s regular trading session, Netflix shares will have lost more than half of their value so far this year — wiping out about 150 billion dollars (£115 billion) in shareholder wealth in less than four months.

How many people password-share on Netflix?

Bury Times: Millions of Netflix users access the site for free through password-sharing (PA)Millions of Netflix users access the site for free through password-sharing (PA) (Image: PA)

Netflix estimated that about 100 million households worldwide are watching its service for free by using the account of a friend or another family member, including 30 million in the US and Canada.

It indicated it will expand a trial programme it has been running in Chile, Costa Rica and Peru, where subscribers can extend service to another household for a discounted price.

The firm offered no additional information about how a cheaper ad-supported tier would work or how much it would cost. Another rival, Hulu, has long offered an ad-supported option.

Netflix hopes these changes will help it build on its current 221.6 million worldwide subscribers, but they also risk alienating customers to the point they cancel the service.