Netflix says it will move to reduce the large number of people watching its services for free, after its first quarter results showed that it had lost 200,000 subscribers.

The company also warned shareholders that it expected another 2 million subscribers could disappear by July.

Rival and relatively new providers like Apple TV and Disney+ are being blamed for the slump, along with the global cost of living crisis, and increased password sharing.

Netflix said subscriber numbers had now fallen to 216 million, but it reckons up to 100 million watchers pay nothing to see its programmes.

"Our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds," said the firm.

Steven Hope, chief executive of password security firm Authlogics, said research had shown that 50 per cent of residents in 17 US states, including California, Illinois, Ohio, Texas and Wisconsin, had admitted to using another person’s Netflix account.

He said of Netflix’s planned crackdown: “The reality is that Netflix will struggle to move to a different authentication mode other than passwords for practical reasons. Would you use a streaming service that requires you to authenticate each time you want to watch, using a one time password, PIN or code, for example? I think not.”

Hope added: “While the suggestion of advertising revenue might plug some of the Netflix sales gap, they would have to tread carefully. Paying customers don’t want to see ads.”

Netflix is also reportedly considering introducing a cheaper version of its service with ads. Hope warned that some cost-conscious paying customers may well downgrade to a cheaper service on offer to accept ads.

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