Staff Writer
Netflix reported on Wednesday that after cracking down on password sharing, the number of subscribers to the media streaming service increased by roughly 6 million.
According to an earnings report, the streaming juggernaut closed the most recent quarter with 238 million subscribers overall and a profit of $1.5 billion.
Analysts think Netflix is better positioned than its competitors to weather the storm, and the increase in subscribers occurred as the US entertainment sector was being slammed by a writers’ and actors’ strike that could be disastrous.
Ted Sarandos, the co-chief executive of Netflix, stated at an earnings presentation that “we are constantly at the table negotiating with everyone across the industry.”
“In order for us to all move forward, we need to end this strike.”
Netflix’s $8.2 billion in sales from April to June fell short of forecasts, driving down the company’s stock price by more than 8% in after-hours trade on Wall Street.
In an effort to boost revenue following a challenging year, Netflix increased its crackdown on users sharing passwords with anyone outside of their immediate family in May.
More than 100 million households were sharing accounts at the site, the business claimed earlier this year.
Let’s face it, Netflix’s password crackdown is effective, according to Louis Navellier, chief investment officer of Navellier and Associates.
“I was overjoyed with the results; I think subscriber growth was a complete home run.”
The company stated in its earnings statement that the policy would be extended to all of its markets across the world.
Netflix has introduced “borrower” or “shared” accounts, in which customers can add more viewers for a higher price or transfer watching histories to new accounts, in an effort to convert non-paying users.
Around the same time as the crackdown, Netflix introduced an ad-supported service, and on Wednesday it dropped its cheapest ad-free option, which cost $10 per month in the US.
According to Insider Intelligence lead analyst Ross Benes, the move to eliminate the basic tier was made in an effort to increase the pricing differential between the advertising and non-advertising tiers and bolster advertising.
The cost of a Netflix ad-supported subscription in the US is $7 per month.
“Creating an advertising company from scratch
According to Netflix’s letter to shareholders, “building an ads business from scratch isn’t easy and we have lots of hard work ahead, but we’re confident that over time we can develop advertising into a multi-billion dollar incremental revenue stream.”
According to Benes’ predictions, Netflix will earn $770 million in US advertising income this year and more than $1 billion by 2024.
Netflix will be under more pressure to raise ad revenue in addition to focusing more on password sharing, Benes predicted.
As the number of subscribers to the service reaches a plateau in more nations, Netflix will concentrate on converting price-conscious freeloaders to its less expensive ad-supported plan.
actor walkout
An actors’ and writers’ strike has forced Netflix and other movie and television producers to suspend production on American soil.
Because of the Hollywood strike, there is concern that they will run out of content, Navellier said AFP. “The share price is down a little after market.”
The first industry-wide walkout in 63 years occurred when members of the Screen Actors Guild (SAG-AFTRA) joined writers who had been on strike for weeks. This effectively shut down Hollywood.
The Third Bridge analyst Jamie Lumley stated that “according to our experts, Netflix is best positioned to weather the strike compared to competitors, but it could start to feel pressure if its content pipeline gets increasingly stressed.”
On an earnings call in April, Sarandos stated that the firm has a “pretty robust slate of releases” in addition to a significant number of future movies and television shows from around the world it survived a blow.
The production business highlighted the popularity of recent “Murder Mystery” and “Extraction” movies as well as popular television shows like “Bridgerton,” “The Witcher,” and “Never Have I Ever.”
“This year we’ll have more returning seasons than any other streamer,” Netflix promised investors, citing a roster that includes “The Crown” and “Virgin River.”
