Netflix Has Added Nearly 6 Million Subscribers Since The Password Sharing Crackdown Took Hold

Netflix experienced a significant surge in paid subscribers, adding nearly 6 million new customers during the second quarter of 2023, ending on June 30. This remarkable growth came in the wake of the company’s crackdown on password sharing. Analysts had originally projected an increase of 1.769 million subscribers for Q2, but Netflix defied expectations by surpassing those estimates and reaching a total of 238.39 million global subscribers—an impressive 8% year-over-year growth.

To tackle password sharing, Netflix started notifying customers in the United States and other countries that users living outside their households would need to be added as “extra members” or pay for their own subscriptions. Although the company did not provide specific numbers on how much of the subscriber gains were attributed to the password-sharing crackdown, sign-ups were already outpacing cancellations for the paid-sharing program. Additionally, the conversion of borrower households into full paying Netflix memberships and the uptake of the extra member feature were contributing to this remarkable increase in subscribers.

There was a noticeable upswing in paid memberships everywhere, but the numbers varied greatly. In North America, the total climbed 1.17 million; Europe, the Middle East and Africa shot up 2.43 million; Latin America had an increase of 1.2 million; while the Asia-Pacific region saw a rise of 1.1 million.

Though it boasted an impressive subscriber surge, Netflix still missed on the revenue side, which caused its stock to drop 6% after-hours. All in all, the company earned $3.29 per share on total earnings of $8.2 billion– a meager 2.7% increase since last year.

Netflix saw a tremendous financial quarter with an impressive profit of $1.5 billion, operating income of $1.8 billion, and a free cash flow reaching $1.3 billion. Looking forward, the company anticipates revenue of $8.5 billion and a net profit of $1.6 billion for the upcoming three months.

Due to changes in its offers, Netflix removed its Basic plan in the US and UK, which was the cheapest streaming option without advertisements. Instead, the business wants to attract more clients to the Standard With Ads plan, which was introduced in November of the year prior and has more than 5 million users. Given the depth and caliber of its content library, Netflix thinks that the Standard With Ads plan’s competitive beginning costs of $6.99 in the United States and £4.99 in the United Kingdom offer exceptional value to customers.

While Netflix has faced some challenges, such as the ongoing WGA and SAG-AFTRA strikes impacting cash content spend, the company remains optimistic about delivering substantial positive free cash flow in 2024. Moreover, Netflix raised its full-year 2023 projection for free cash flow to at least $5 billion, reflecting lower cash content spend than initially anticipated.

Netflix’s executives are scheduled to discuss the quarter’s results in greater detail during a pre-recorded analyst interview, giving stakeholders further insights into the company’s performance and future plans.

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