Netflix reported a surge in subscriptions to its media streaming service, with nearly 6 million new subscribers added, following its crackdown on password sharing. The company now boasts 238 million subscribers and recorded a profit of $1.5 billion in the last quarter.
This increase in subscribers comes amidst a writers and actors strike impacting the US entertainment industry. However, analysts believe Netflix is better positioned than its competitors to weather the effects of the strike. Netflix’s co-chief executive, Ted Sarandos, stated they are actively negotiating with industry stakeholders to resolve this.
While revenue fell short of expectations at $8.2 billion for the April to June period, Netflix remains optimistic about its crackdown on password sharing, which has helped boost revenue after a challenging period in the previous year. The company had previously noted that over 100 million households were sharing accounts, and the efforts to curb this have been successful.
To attract non-paying users, Netflix introduced “borrower” or “shared” accounts, allowing subscribers to add viewers for a higher fee or transfer viewing profiles to new versions. The company also launched an ad-subsidized offering and eliminated its lowest-priced ad-free plan. This move aims to bolster advertising revenue by increasing the price difference between advertising and non-advertising tiers.
Netflix is confident its ad business will grow significantly, aiming to become a multi-billion dollar revenue stream. Analysts predict that Netflix’s advertising revenue in the US will reach $770 million this year and exceed $1 billion by 2024. As the company’s subscriber growth stabilizes in various markets, it will likely focus on shifting price-sensitive users towards the more affordable ad-supported plan.
The earnings report coincided with a challenging time for Netflix and other film and television makers due to ongoing actors and writers’ strikes in the United States. The strike has led to production halts, raising concerns about potential content shortages for streaming platforms like Netflix.
According to Navellier, there are worries in the market that Netflix might run out of content as a result of the Hollywood strike, which has seen both Screen Actors Guild (SAG-AFTRA) members and writers participating in an industry-wide walkout, the first of its kind in 63 years.
While analysts believe Netflix is better positioned than its competitors to weather the strike, Third Bridge analyst Jamie Lumley pointed out that the streaming giant may still face pressure if its content pipeline becomes increasingly strained. During an earnings call in April, Netflix’s co-chief executive, Ted Sarandos, mentioned that the company has a substantial and diverse lineup of releases, including numerous upcoming films and shows from around the world, which would help them endure the strike.
In the earnings report, Netflix highlighted the success of various recent releases, such as “Murder Mystery” and “Extraction,” along with popular series like “Bridgerton,” “The Witcher,” and “Never Have I Ever.” The company assured shareholders they would have more returning seasons than any other streaming service, mentioning hit series like “The Crown” and “Virgin River,” among others. Despite the challenges posed by the strike, Netflix remains optimistic about its content offerings and ability to navigate through this period of disruption.
