Netflix Earnings: Streamer Wins With Password Crackdown, Adds 5.9 Million Subscribers

Forbes Business Media Netflix Earnings: Streamer Wins With Password Crackdown, Adds 5. 9 Million Subscribers Toni Fitzgerald Contributor Opinions expressed by Forbes Contributors are their own. I cover the business of television Following Jul 19, 2023, 05:32pm EDT | Press play to listen to this article! Got it! Share to Facebook Share to Twitter Share to Linkedin Netflix added almost 6 million subscribers in second quarter, gains fueled by its password .

. . [+] crackdown.

Future Publishing via Getty Images Is the Netflix NFLX password crackdown working? In a word, yes. In two words, exceptionally well. Netflix released second quarter earnings numbers Wednesday that reflected the early success of its new rules preventing people from sharing their passwords and forcing them to sign up for their own accounts.

The streamer saw blockbuster global subscriber growth, gaining 5. 9 million. That was more than double the gains expected by most analysts, and it marked the biggest quarterly increase in subscriber numbers in three years.

By comparison, it added 1. 75 million in first quarter of this year. Netflix now has 238.

4 million subscribers worldwide. It also capped a remarkable turnaround over the past year for the most popular streaming service, which last year at this time seemed in the doldrums. It reported an all-time worst 970,000 subscriber loss during second quarter 2022, and analysts were skeptical that Netflix could turn it around.

MORE FOR YOU New Apple Exclusive Reveals iPhone 15 Design Surprise The Worst Scene From The Flash Is Now Going Viral Phoenix Salt Lake City Set High Temperature Records Here s Where Else Records Could Fall A Tough 2022 For Netflix There were a lot of things going against the service. The pandemic, which forced people to stay in their homes and led to that record 10 million-subscriber leap in second quarter 2020, was waning—good for the world at large but bad for companies that plumped up on the boredom people felt during lockdowns. The streaming landscape had become way more competitive, with services such as HBO Max (now just Max), Peacock and Paramount+ crowding the field that Netflix (and, to a much lesser extent, Amazon AMZN Prime and Hulu) had long dominated.

And Netflix faced some unique crosswinds that seemed to be hurting its allure. No longer the jaunty startup happy to experiment and try new things, Netflix had shareholders concerned about its rising prices, which turned off consumers, and its failure to do anything about what it claimed were tens of millions of people watching the service for free by using friends’ and family’s passwords. Netflix definitely listened and responded to the concerns where it could.

Additionally, the service, which co-founder Reed Hastings had long insisted would never air commercials, began accepting ads for the first time. It launched an ad-supported tier , priced lower than its basic one , last fall, and the timing was ideal. Inflation has prompted many families to cut back on extras like entertainment, such as going from four streaming services to one or two.

The lower-priced Netflix option became attractive. It now has a reported 5 million subscribers. Password Crackdown Changes Consumer Behavior But it was clearly the password crackdown that had the biggest impact on this quarter’s unexpected growth.

It appears Netflix wasn’t exaggerating when it claimed that tens of millions of people were sharing passwords and costing the streamer subscribers. It had always said that, but many were skeptical of just how much of an impact that had. Netflix phased in the crackdown slowly.

It rolled out in countries beyond the United States first, allowing the streamer to troubleshoot it as well as inform people in other places that this was coming. The new policy launched in May in the United States. It allowed people to buy an extra membership on their own account for former “sharers” at a reduced price of $7.

99 per month. “A Netflix account is for use by one household. Everyone living in that household can use Netflix wherever they are — at home, on the go, on holiday — and take advantage of new features like Transfer Profile and Manage Access and Devices,” the company said in its May 23 update about the password sharing rules.

Other Concerns For Netflix Of course, while the subscription gains were great news for the streamer, it has other headaches on the horizon. The dual writers and actors strike has Hollywood on pause, and shareholders are concerned about what it means to have no new content produced until the producers reach a deal with the unions. That could certainly impact subscriptions moving forward as well.

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