Netflix Subscriptions Sees Subscriber Surge Following Password-Sharing Clampdown
In an unprecedented turn of events, streaming service provider Netflix announced a surge of nearly 6 million subscriptions on the heels of its stringent crackdown on password sharing. As per the recent earnings release, the streaming platform closed the last quarter with 238 million subscribers worldwide and a profit that soared to $1.5 billion.
Crackdown Proves Beneficial Amid Industry Strike
Interestingly, this rise in Netflix’s subscription base coincides with a significant writers and actors strike rocking the U.S. entertainment industry. Industry insiders suggest that Netflix is far better equipped than its rivals to survive this turmoil.
“We are constantly negotiating with everyone across the industry,” Netflix’s co-CEO, Ted Sarandos, said during an earnings presentation. “We need to resolve this strike so that we can all move forward.”
Despite the surge in subscribers, Netflix’s revenue fell short of expectations, with sales over the April to June period totaling $8.2 billion, resulting in an 8% drop in the company’s shares during after-hours trading.
Addressing the Password Sharing Dilemma
Earlier this year, Netflix raised concerns over 100 million households sharing service accounts. In response, the company ramped up its crackdown on password sharing beyond immediate family members, aiming to bolster its revenue after a challenging period last year.
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“Let’s face it, the crackdown on passwords is working,” stated Louis Navellier, the Chief Investment Officer at Navellier and Associates. The company’s aggressive stance towards password sharing seems to have paid off with a noticeable increase in subscriber growth.
Building a Brighter Future for Netflix
To transition non-paying users to subscribed members, Netflix introduced “borrower” or “shared” accounts, allowing subscribers to add extra viewers for an increased price or transfer viewing profiles to new accounts. The company also initiated an ad-subsidized offering and dropped its lowest priced ad-free plan costing $10 a month in the U.S.
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The elimination of the basic tier aims to reinforce advertising by magnifying the price gap between its ad-supported and non-ad tiers. As per the company’s letter to shareholders, the platform is confident in its ability to turn advertising into a multi-billion dollar revenue stream over time.
As Netflix’s subscriber base plateaus in more countries, the focus is on moving price-sensitive freeloaders to its cheaper ad-supported plan. At the same time, the company will continue to combat password sharing to expand ad revenue
