Netflix’s Subscribers Surge Amid Password Sharing Crackdown

Netflix seems to be benefiting from its recent measures against password sharing. On Wednesday, the streaming giant announced nearly six million new paid memberships in the quarter ending in June, pushing its global count to over 238 million.

The company announced the implementation of its paid sharing initiative — a strategy aimed at deterring users from freely sharing their accounts with others — across more than 100 countries, following an extensive launch earlier this year.

Netflix reported that revenues in these regions have surged since the service’s inception, and indicated that “sign-ups are already exceeding cancellations.”

Spencer Neumann, Netflix’s Chief Financial Officer, dubbed the initiation of paid sharing as Netflix’s “primary revenue accelerator in the year” during the company’s Q2 earnings conference.

He said, “Most of our revenue growth this year is from growth in volume from new paid memberships and that’s largely driven by our paid sharing rollout.” This positive outcome comes at a crucial juncture for Netflix.

The platform aims to increase earnings through a combination of password sharing limitations, a new ad-supported subscription model, and potential strikes from Hollywood actors’ and writers’ unions that might affect its upcoming original content.

Netflix’s co-CEO, Ted Sarandos, expressed his concerns about the strikes during the Wednesday call, labeling it as “not the outcome we wanted.”

Sarandos also mentioned that Netflix extensively produces “all kinds of content,” citing its investments in unscripted and global content, among others, in response to questions about potential original content shortages if the actors’ and writers’ strikes continue.

His statement concluded with: “The real point is we need to get the strike to a conclusions so that we can all move forward.”

Despite the revenue boost due to Netflix’s actions against password sharing, the company didn’t quite reach Wall Street’s estimates.

The company reported close to $8.19 billion in revenue for the quarter, compared to the projected $8.3 billion. The company also announced a net income of $1.49 billion, a 3% increase from the same time the previous year.

“While we’ve made steady progress this year, we have more work to do to reaccelerate our growth,” the company stated in an investor letter about the results.

It was also noted that subscriptions to its lower-cost, ad-supported plan have doubled since the beginning of the year, but that “current ad revenue isn’t material for Netflix.”

Netflix’s shares (NFLX) dropped over 4% in after-hours trading on Wednesday after the results were announced.

The company anticipates generating $8.5 billion in revenue in the current quarter, a 7% rise from the previous year but less than the estimated $8.7 billion by analysts.

The company also expects the number of paid net additions in the September quarter to be similar to the June quarter.