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Netflix’s password-sharing crackdown reels in subscribers as it raises prices for its premium plan

by Lucas Garcia
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Netflix subscription growth

Netflix’s efforts to crack down on password sharing are yielding positive results, with the streaming giant revealing impressive subscriber gains during the summer that exceeded industry expectations. This move is converting freeloaders into paying customers and bolstering the company’s financial performance.

To further boost revenue, Netflix has announced a price increase for its premium plans. The most expensive streaming service will see a $2 rise to $23 per month in the U.S., representing a 10% increase. The ad-free streaming plan’s price will also increase by $2 to $12. The cost of Netflix’s most popular streaming option in the U.S. remains at $15.50 per month, while a $7 monthly plan with intermittent commercials remains unchanged. Similar price hikes have been implemented for subscribers in the U.K. and France.

These strategic moves have resulted in a substantial increase in worldwide subscribers during the July-September period, with Netflix adding nearly 8.8 million subscribers. This figure is more than triple the number gained during the same period the previous year. As a result, Netflix now boasts approximately 247 million worldwide subscribers, surpassing the 243.8 million projected by analysts.

In terms of financial performance, Netflix exceeded analyst forecasts, reporting earnings of $1.68 billion, or $3.73 per share, marking a 20% increase from the previous year. Revenue also saw an 8% increase, reaching $8.54 billion. These impressive figures led to a more than 12% surge in Netflix’s stock price in extended trading.

Netflix’s success this year is noteworthy, with over 16 million subscribers added in the first nine months alone, surpassing the total number added in the entire previous year. However, it falls short of the exceptional 36 million additional subscribers gained in 2020, when the pandemic led to a surge in demand for streaming services.

Despite recent labor disputes in the entertainment industry, including writers’ and actors’ strikes related to compensation issues, Netflix has navigated these challenges by relying on its backlog of completed TV series and movies, as well as productions from international markets unaffected by the disputes. In a bid to rebuild its library of original programming, Netflix plans to invest approximately $17 billion in TV series and films next year.

One notable factor contributing to Netflix’s subscriber growth has been its decision to crack down on password sharing, abandoning its previous practice of allowing subscribers to share their account passwords with friends and family outside their households. This move has prompted viewers who were accessing the service for free to sign up for their own accounts. Moreover, current subscribers have the option to share their accounts with individuals outside their households by paying higher monthly fees. Netflix’s co-CEO, Greg Peters, expressed satisfaction with the progress of this crackdown, anticipating continued subscriber gains over the coming quarters.

Netflix’s exploration of new revenue streams includes a low-priced option with advertising, introduced a year ago. While the impact of this change hasn’t been substantial yet, analysts believe it has the potential to grow as advertisers recognize the value of Netflix’s access to viewers’ entertainment preferences for targeted advertising. Netflix is collaborating with its advertising partner, Microsoft, to enhance the precision of ad targeting.

In conclusion, Netflix’s proactive measures to address password sharing and implement price adjustments have contributed to its continued success in the highly competitive streaming landscape, positioning the company for sustained growth in the future.

Frequently Asked Questions (FAQs) about Netflix subscription growth

What led to Netflix’s impressive subscriber gains during the summer?

Netflix’s crackdown on password sharing and its strategic price hikes contributed to its substantial subscriber gains during the summer.

What are the details of Netflix’s price increases?

Netflix has increased the price of its most expensive streaming service by $2 to $23 per month in the U.S., representing a 10% increase. The ad-free streaming plan also saw a $2 bump, now priced at $12. However, the $15.50 per month cost for Netflix’s most popular streaming option in the U.S. remains unchanged, as does the $7 monthly plan that includes intermittent commercials.

How many subscribers did Netflix add during the July-September period?

Netflix added nearly 8.8 million subscribers worldwide during the July-September period, more than tripling the number gained during the same time last year.

What is Netflix’s current total number of worldwide subscribers?

Netflix now boasts approximately 247 million worldwide subscribers, surpassing the 243.8 million projected by analysts.

How did Netflix perform financially during this period?

Netflix exceeded analyst expectations, reporting earnings of $1.68 billion, or $3.73 per share, a 20% increase from the previous year. Revenue also climbed 8% to $8.54 billion.

What has been Netflix’s stock performance?

Netflix’s stock price surged more than 12% in extended trading after the latest quarterly numbers were released. The company’s shares have increased by about 30% so far this year.

How has Netflix handled labor disputes in the entertainment industry?

Despite labor strikes in the entertainment industry, including writers’ and actors’ complaints about compensation, Netflix has navigated these challenges by utilizing its backlog of completed TV series and movies and productions from international markets unaffected by the disputes.

What is Netflix’s strategy for the future in terms of original programming?

Netflix plans to spend about $17 billion on TV series and films next year as part of its effort to rebuild its library of original programming.

How has Netflix’s crackdown on password sharing impacted subscriber behavior?

The crackdown on password sharing has prompted viewers who were accessing the service for free to sign up for their own accounts. Additionally, current subscribers can share their accounts with individuals outside their households by paying higher monthly fees.

What is Netflix’s approach to advertising, and how has it performed so far?

Netflix introduced an ad-supported option a year ago, but its impact hasn’t been significant yet. However, analysts believe that as advertisers recognize the value of Netflix’s access to viewers’ entertainment preferences for targeted advertising, this could change. Netflix is working with its ad partner, Microsoft, to enhance ad targeting precision. Roughly 30% of incoming subscribers opt for the $7 plan with commercials, indicating potential growth in this area.

What are the future expectations for Netflix’s revenue and subscriber base?

The “streamflation” era is expected to continue, with consumers experiencing price hikes and limited password sharing. Netflix’s subscriber growth, combined with its advertising potential, positions the company for continued revenue growth and subscriber diversification.

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