Netflix adds six million subscribers after password crackdown

SAN FRANCISCO: Netflix on July 19 said subscriptions to the media streaming service climbed by nearly six million following its crackdown on password sharing.

The streaming giant finished the recently ended quarter with a total of 238 million subscribers and revenue of US$1.5bil, according to an earnings release.

The bumper pickup in subscribers comes as potentially damaging writers and actors hit the US entertainment industry, but with analysts saying Netflix is ​​better positioned than its rivals to weather the storm.

“We are seeing healthy conversions of borrower households to fully paid Netflix memberships as well as the acquisition of our additional member feature,” Netflix said in a letter to shareholders.

But revenue fell short of expectations with Netflix posting US$8.2 billion in sales in the April to June period, pushing the company’s shares up more than 5% in after-hours trading on Wall Street.

Netflix in May expanded its crackdown on users sharing passwords with people beyond their immediate family as it seeks to boost revenue after a difficult patch last year.

Earlier this year the company complained that more than 100 million households share accounts with the service.

“Let’s face it, the crackdown on passwords works,” Navellier and Associates chief investment officer Louis Navellier said of Netflix.

“I am very happy with the results; I think they hit the ball out of the park with subscriber growth.”

In its earnings statement, the company said the policy will expand to all its markets worldwide.

To convert non-paying users, Netflix introduced “borrower” or “shared” accounts, where subscribers can add additional viewers for a higher price or transfer viewing profiles to new accounts.

In a separate bid for revenue, Netflix launched an ad-subsidised offer around the same time as the crackdown, and on Wednesday scrapped its lowest-priced ad-free plan costing US$10 per month in the US.

“The decision to reduce its core tier is an effort to boost advertising by increasing the price difference between its advertising and non-advertising tiers,” said Insider Intelligence principal analyst Ross Benes.

Netflix last year launched an ad-supported subscription tier for US$7 monthly.

But Netflix acknowledged that advertising is in its early stages.

“Building an ads business from scratch is not easy and we have many challenges ahead, but we are confident that over time we will be able to build advertising into a multi-billion dollar incremental revenue stream,” Netflix said in a letter to shareholders.

Benes estimates that Netflix will generate US$770mil in advertising revenue in the US this year, and more than US$1bil by 2024.

“Netflix’s increased focus on password sharing will coincide with increased pressure to expand ad revenue,” Benes said.

“That was no accident. As the service’s subscriber base plateaus in more countries, Netflix will focus on moving price-sensitive freeloaders to its cheaper ad-supported plan.”

Actors on strike

The earnings report came as Netflix and other film and television producers saw production halted by a strike by actors and writers in the United States.

“The share price dropped a bit after market; there is concern that they will run out of content because of the Hollywood strike,” Navellier told AFP.

Members of the Screen Actors Guild (SAG-AFTRA) joined writers who went on strike for weeks, triggering the first industry-wide walkout in 63 years and effectively shutting down Hollywood.

Netflix co-chief executive Ted Sarandos said in an earnings call in April that the company has a “pretty solid slate of releases” and a large base of upcoming movies and shows from around the world to help it weather the strike.

The company touted the success of fresh Murder Mystery and Extraction movies, as well as series like Bridgerton, The Witcherand I have never experienced it.

“This year we will have more returning seasons than any other streamer,” Netflix told shareholders, sharing a list that included The crown and Virgin River. – AFP

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