Netflix has declared its password sharing crackdown a success after announcing nearly 6 million people had signed up during the second quarter of 2023.
Netflix reported 5.9 million new paid customers for the period ending June 30 2023, beating expectations. Netflix will be pleased with the figure, so it’ll be disappointing for those who had been expecting the streaming giant to back down on its password sharing crackdown.
Netflix is also dropping its Basic plan—the cheapest option without ads—in the US and the UK. It is thought the streaming giant is using this move to encourage people to take out the ad-supported option instead.
“[We are] now offering 95% content parity globally (by viewing), more streams plus improved video quality on our ads plan, we’re partnering with Nielsen and EDO to improve measurement and innovating for advertisers,” Netflix said in a shareholder letter.
Netflix collects a lot of data about users. This helps it pinpoint when more than one person is using a password via location indicators and will undoubtedly be useful for advertising.
Netflix Password Sharing Crackdown Doubts
Netflix has been enforcing the new password sharing measures via emails to account holders. While it might appear the crackdown is a success, Netflix revenue was actually slightly lower than expected, suggesting the new strategy alone might not be enough to rival the new breed of streaming giants such as Disney.
It led to shares in Netflix dropping 8% on Thursday, according to Variety, which said: “Revenue for Q2 came in at $8.19 billion, shy of Wall Street’s $8.3 billion consensus expectations. And Netflix’s guidance for Q3 revenue of $8.52 billion also was less than the $8.9 billion average forecast by analysts.”
Even so, Netflix itself was confident: “We expect revenue growth to accelerate in the second half of 2023 as we start to see the full benefits of paid sharing plus continued steady growth in our ad-supported plan,” the shareholder letter said. “We’re still targeting a full year 2023 operating margin of 18% to 20%,” the streaming giant added.
According to Netflix, extra member accounts are not included in its paid membership count but add revenue included in its “average revenue per member.”
“While we’re still in the early stages of monetization, we’re seeing healthy conversion of borrower households into full paying Netflix memberships as well as the uptake of our extra member feature,” the shareholder letter said.
Netflix is also continuing its crackdown in other countries where it hasn’t yet enforced the new strategy. “In these markets, we’re not offering an extra member option given that we’ve recently cut prices in a good number of these countries (for example, Indonesia, Croatia, Kenya, and India) and penetration is still relatively low in many of them so we have plenty of runway without creating additional complexity,” Netflix said, adding that households “borrowing Netflix” will be able to transfer existing profiles to new and existing accounts.
Many people are unhappy about Netflix’s password sharing crackdown, saying it doesn’t cater well for families with kids in college, for example. However, it doesn’t look like Netflix is going to change, so the choice is to give up Netflix—or pay the fee to share.
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