Netflix earnings: password crackdown delivers millions of new members

Netflix Inc. added 5.9 million customers in the second quarter of the year, more than doubling Wall Street estimates after cracking down on people who share their passwords. The results announced Wednesday mark the company’s best second quarter since the depths of the pandemic three years ago and far surpass Wall Street forecasts of 2.07 million new subscribers. Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here The numbers show the company’s twin strategies of cracking down on sharing and launching a new advertising-supported tier are paying off. Earlier Wednesday, Netflix eliminated its lowest-priced ad-free plan, pushing consumers toward a lower-priced, ad-backed service or a costlier commercial-free plan. Also read: Netflix's Peter Naylor on new ad targeting capabilities In May, the streaming leader started charging people in more than 100 countries to continue sharing their passwords, a key part of its plan to accelerate growth after a sluggish 2022. Viewers using someone else’s subscription can now either pay to keep sharing or set up their own account. The plan has been controversial with users, and analysts weren’t sure how it would impact the company’s growth. Netflix had warned that it would see an uptick in cancellations at the start of the crackdown and that it would see more growth in the back half of this year. But in recent weeks, third-party data indicated that Netflix was seeing a surge in customers. The company said new sign-ups are already exceeding cancellations and that sales growth will accelerate in the months ahead, with third-quarter growth projected at 7.5%. Second-quarter sales rose 2.7% to $8.19 billion, coming in slightly below analysts’ estimates, as did the projection for the current period. That is due partly to foreign exchange rates and to price cuts in some markets. The company finished the quarter with 238.4 million members, up 8% from a year ago. While analysts have raised concerns about losses from streaming at many of Netflix’s competitors, including Walt Disney Co. and Warner Bros. Discovery Inc., Netflix is delivering higher profit quarter after quarter. Second-quarter earnings, at $3.29 a share, beat the $2.85 a share average of analyst estimates. “While streaming is intensely competitive, we’ve shown that with strong execution and focus, it can be a great business,” the company said in a letter to shareholders. The company raised its 2023 forecast for free cash flow to $5 billion, from at least $3.5 billion previously, as a result of a strike by writers and actors, which has shuttered production and cut spending. The password crackdown will provide a temporary boost in subscribers. Netflix had long said it didn’t care if people used someone else’s account. But that was when it was adding more than 25 million customers a year. Netflix lost customers in the first half of 2022, prompting a steep drop in the shares and leading to a selloff in other media stocks. —Bloomberg News Subscribe to Ad Age Sign up now for the latest industry news and analysis Click here

Netflix password crackdown delivers millions of new members

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