Netflix lookahead: Password sharing crackdown could boost revenues
Netflix’s password sharing crackdown could bolster revenues for the streamer as it gears up to post second quarter results on Wednesday, analysts have suggested.
With Netflix subscription sign ups having been on the rise for the past three quarters, AJ Bell analyst Danni Hewson said they are expected to come in higher in the latest quarter compared to the previous one, although this “would be unusual for the seasonality shown by the business to date.”
AJ Bell predicts Netflix revenues could rise by three per cent to $8.2bn, only slightly lower than the company’s own guidance.
Subscriber numbers dropped everywhere bar the Asia Pacific region, which made up for the fall with a gain of 1.46m new sign ups.
In May, Netflix announced it was putting an end to the over 100m households globally watching its shows on an account they are not paying for. The streaming giant told users they could pay £5 a month to share an account with another user living elsewhere.
JP Morgan analyst Doug Anmuth estimated last month that the move could generate extra revenues of $3.5bn (£2.7bn) by 2025 as it monetises 33m of the password sharers.
Netflix first announced the in 2022, saying password sharing undermines their ability to invest in and improve their services.
The crackdown has already caused the new subscriber count to spike 236 per cent spike in the US between 21 May and 18 June this year, according to a report by Bloomberg Second Measure.
Michael Hewson, chief market analyst at CMC Markets, however predicted that Netflix “could see a drop in subscriber numbers on this quarter as it rolled out paid sharing in the UK and US.”
He explained: “If current trends are any guide this could prompt some initial cancellations which could slow subscriber growth, however, if the name of the game is to maximise revenue, then there’s every chance that [this] won’t unduly slow the overall trend to sustainable cash flow and steady margin.”
The company are also looking towards their ad-supported subscription tier to draw in customers looking for a cheaper plan. Running at £4.99 per month and launched in the UK last November, the more economic subscription option attracted nearly 5m active monthly users in its first six months Netflix said.
In their first quarter, Netflix reported a total of 232.5m paying customers worldwide.
Netflix shares have had a blockbuster year, soaring over 131 per cent to one-year highs.