Netflix charge on password sharing wins more revenues, subscribers

Netflix move requiring users to pay an extra $8 to share passwords has boosted its revenues and kept subscribers loyal prompting the company to expand the measure globally.

In May, Netflix launched ‘Paid Sharing’ a soft crackdown on password sharing in over 100 countries, representing more than 80 percent of the streaming company’s revenue base. Netflix, which made $8.2 billion in quarter two revenues with an operating profit of $1.8 billion said returns in each region is now higher than pre-launch, with sign-ups already exceeding cancellations.

Paid net additions were 5.9 million in Q2, meaning the company was retaining more people than cancellation and now Netflix are rolling out paid sharing to almost all of the remaining countries to replicate the success.

Tackling account sharing between households has been the company’s focus as it undermines the ability to invest to improve Netflix for the paying members and growing the business. 

“Netflix now addresses account sharing between households in almost all of the remaining countries. In these markets, Netflix will offer an extra member option given that they have recently cut prices in a good number of these countries (for example, Indonesia, Croatia, Kenya, and India),” Netflix said in a note to investors.

Netflix is currently a market leader in terms of streaming engagement, and, per Nielsen, it was the top original streaming series in the US for 24 of the first 25 weeks of 2023, and the top movie for 21 weeks.

But while streaming business is growing rapidly in US and global markets edging out broadcast, cable and satellite TV as the new frontier of entertainment, the competition is heating up.

The business is dominated by Youtube and Netflix with Hulu, Disney and Prime video commanding a big chunk of the market.

Read also: Kenyans among budding filmmakers set for world-class training by Netflix

Netflix sees potential

Netflix say their biggest traditional entertainment competitors, Disney, Comcast/NBCU, Paramount Global and Warner Brothers Discovery — with their large content libraries and creative expertise — are now focused on profit so they can build sustainable, long term streaming businesses.

Their big tech competitors Apple, Amazon and YouTube — with their broad reach and deep pockets —continue to invest heavily to grow their streaming revenues.

As internet spreads across developing markets like Kenya, with a young urban population, Netflix sees lucrative potential in creating affordable offers at scale. Netflix said with the launch of paid sharing broadly, the company has increased confidence in the financial outlook.

It expects revenue growth to accelerate in the second half of 2023 as monetization grows from recent paid sharing launch and expanded initiatives across nearly all remaining countries plus the continued steady growth in the ad-supported plan.

“In addition to delivering an ever-improving slate and product experience, the company has been working to improve monetization through initiatives like paid sharing and advertising. This will allow it to generate more revenue off a bigger base, which we can reinvest to make Netflix even better for our members,” Netflix said.

Advertising also enables the company to offer consumers a lower price point and, eight months post launch, they are working hard to scale the business. The key focus is improving the ads experience for both members and advertisers.

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