Netflix: Subscribers up, password sharing down, as clampdown pays off
Netflix has gained nearly six million subscribers this quarter as its password sharing clampdown bears immediate fruit.
Announcing its second quarter results, the company said paid subscribers grew by 4.14m April through June as they rolled out so-called paid sharing in over 100 countries.
The firm had become aware that a number of users of its services were sharing passwords across different households.
Total subscribers jumped eight per cent year on year.
Netflix estimates the number of new paid sign ups for its next quarter will be similar.
Although Netflix beat Wall Street earning estimates, it narrowly missed on revenue, posting $8.19bn, compared to forecasts of $8.3bn.
In May, Netflix ended password sharing for the more than 100m households watching its shows on an account shared with other households.
It told users they could pay £5 a month to share an account with another user living elsewhere instead.
Netflix first announced the in 2022, saying password sharing between multiple households “undermines” their ability to invest in and improve their services.
On Wednesday the US streamer said “the cancel reaction was low and while we’re still in the early stages of monetization, we’re seeing healthy conversion of borrower households into full paying Netflix memberships.”
Paolo Pescatore, TMT analyst at PP Foresight, warned the crackdown on passwords should only be a “short term measure”.
He said: “Cracking down on passwords is a short term measure and [Netflix] needs to consider its pricing strategy for the mid-to-long term. During this transition there will be ongoing challenges and expect to see spikes in churn, net adds and average revenue per user (ARPU) with the rollout of new features and services such as advertising.”
“Every other streamer is now increasing prices while Netflix is now extremely competitive with its ad tier.
“It is putting all the building blocks in place for future revenue growth. The company is still in a far stronger position compared to rivals and remains the benchmark.”
Netflix said they expect accelerated revenues in the second half of 2023 as their ad-supported plan experiences “steady growth” after it was introduced late last year.
However, Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said the ad-supported tier is yet to prove itself.
Initial progress seems positive, but we are realms away from knowing for sure if this venture is the cash cow it’s been sold as,” she said.
“Netflix needs to squeeze as much juice as it can from different avenues, given a recent lack of price increases could suggest that inflation is starting to bite Netflix’s ability to crank up its subscription price, as households look to trim their spending.”