Netflix gains 6M new subscribers after password crackdown
The streaming giant enjoyed its biggest springtime spurt in subscribers in years, providing the latest sign that a recent crackdown on password sharing and the rollout of a cheaper subscription option are paying off.
The platform's subscriber base growth proves resilience while the US entertainment industry grapples with a paralysing writers and actors strike./ Photo: AFP
Netflix has said subscriptions to the media streaming service climbed by nearly 6 million in the wake of its crackdown on password sharing.
The streaming giant finished the recently ended quarter with a total of 238 million subscribers and a profit of $1.5 billion, according to an earnings release on Wednesday.
The pickup in subscribers came as a potentially crippling writers and actors strike hits the US entertainment industry, but with analysts saying Netflix is better positioned than its rivals to weather the storm.
"We are constantly at the table negotiating with everyone across the industry," Netflix co-chief executive Ted Sarandos said during an earnings presentation on Wednesday.
"We need to get this strike to a conclusion so that we can all move forward."
Revenue came in lower than expected with Netflix posting $8.2 billion in sales over the April to June period, pushing the company's shares down more than 8 percent in after-hours trading on Wall Street.
Strategic crackdown
Netflix in May expanded its crackdown on users sharing passwords with people beyond their immediate family as it seeks to shore up revenue after a rough patch last year.
Earlier this year the company complained that more than 100 million households were sharing accounts at the service.
"Let's face it, the crackdown on passwords is working," Navellier and Associates chief investment officer Louis Navellier said of Netflix.
"I was ecstatic with the results; I think they hit the ball out of the park with subscriber growth."
In its earning statement, the company said that the policy would expand to all its markets worldwide.
To convert non-paying users, Netflix has introduced "borrower" or "shared" accounts, in which subscribers can add extra viewers for a higher price or transfer viewing profiles to new accounts.
Netflix launched an ad-subsidised offering around the same time as the crackdown, and on Wednesday eliminated its lowest-priced ad-free plan that cost $10 a month in the US.
"The decision to cut its basic tier is an effort to bolster advertising by elevating the price difference between its advertising and non-advertising tiers," said Insider Intelligence principal analyst Ross Benes.
A Netflix ad-supported subscription is available in the United States for $7 monthly.
Benes estimates that Netflix will generate $770 million in advertising revenue in the US this year, and more than $1 billion by 2024.
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