Netflix expanded crackdown on users sharing passwords with people beyond their immediate family in May
The streaming giant finished the recently ended quarter with
a total of 238 million subscribers and a profit of $1.5 billion, according to
an earnings release.
The pickup in subscribers came as a potentially crippling
writers and actors strike hits the US entertainment industry, but with analysts
saying Netflix is better positioned than its rivals to weather the storm.
"We are constantly at the table negotiating with
everyone across the industry," Netflix co-chief executive Ted Sarandos
said during an earnings presentation.
"We need to get to this strike to a conclusion so that
we can all move forward."
Revenue came in lower than expectations with Netflix posting
$8.2 billion in sales over the April to June period, pushing the company's
shares down more than 8 percent in after hours trading on Wall Street.
Netflix in May expanded its crackdown on users sharing
passwords with people beyond their immediate family as it seeks to shore up
revenue after a rough patch last year.
Earlier this year the company complained that more than 100
million households were sharing accounts at the service.
"Let's face it, the crackdown on passwords is
working," Navellier and Associates chief investment officer Louis
Navellier said of Netflix.
"I was ecstatic with the results; I think they hit the
ball out of the park with subscriber growth."
In its earning statement, the company said that the policy
would expand to all its markets worldwide.
To convert non-paying users, Netflix has introduced
"borrower" or "shared" accounts, in which subscribers can
add extra viewers for a higher price or transfer viewing profiles to new
accounts.
Netflix launched an ad-subsidised offering around the same
time as the crackdown, and on Wednesday eliminated its lowest priced ad-free
plan that cost $10 a month in the US.
"The decision to cut its basic tier is an effort to
bolster advertising by elevating the price difference between its advertising
and non-advertising tiers," said Insider Intelligence principal analyst
Ross Benes.
A Netflix ad-supported subscription is available in the
United States for $7 monthly.
"Building an ads business from scratch isn't easy and
we have lots of hard work ahead, but we're confident that over time we can
develop advertising into a multi-billion dollar incremental revenue
stream," Netflix said in the letter to shareholders.
Benes estimates that Netflix will generate $770 million in
advertising revenue in the US this year, and more than $1 billion by 2024.
"Netflix's increased focus on password sharing will
occur alongside heightened pressure to expand ad revenue," Benes said.
"As the service's subscriber base plateaus in more
countries, Netflix will focus on moving price-sensitive freeloaders to its
cheaper ad-supported plan."
Actors on strike
The earnings report came as Netflix and other film and
television makers see productions halted by an actors and writers strike in the
United States.
"The share price is down a bit after market; there is
worry they will run out of content because of the Hollywood strike,"
Navellier told AFP.
Screen Actors Guild (SAG-AFTRA) members joined writers who
have been on strike for weeks, triggering the first industry-wide walkout for
63 years and effectively shutting down Hollywood.
"Our experts say that Netflix is best positioned to
weather the strike compared to competitors, but it could start to feel pressure
if its content pipeline gets increasingly strained," said Third Bridge
analyst Jamie Lumley.
Sarandos said on an earnings call in April that the company
has a "pretty robust slate of releases" and a large base of upcoming
films and shows from around the world to help it endure a strike.
The company touted the success of fresh "Murder
Mystery" and "Extraction" films, as well as series such as
Bridgerton, The Witcher, and Never Have I Ever.
"This year we'll have more returning seasons than any other streamer," Netflix told shareholders, sharing a list that included The Crown and Virgin River.
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