Netflix’s calculations against the sharing of passwords outside of a household are apparently working out. The video streaming service reportedly added 5.9 million customers in the second quarter. How many of them were previously account free riders who now have their own account is not clear from the notification. Co-CEO Greg Peters emphasized that each region has more subscribers and sales than before. “We see that it works.”
Since the beginning of the summer, Netflix has been taking action against users sharing an account across a household. Additional money is due for this – either the co-users pay for their own account, or the previous account owner adds them as an additional member for 4.99 euros per month. This is how much the cheapest subscription with advertisements costs in Germany.
According to earlier calculations by Netflix, around 100 million people used the password from another household. The company is betting that affected users would rather pay than cancel the service. Netflix now had a total of 238.4 million paying customers at the end of the quarter. For the current quarter, Netflix expects an increase in the number of users of a similar magnitude. For some affected users, it could take several quarters to win them over as customers, Peters admitted on Thursday night.
Netflix’s strategy is risky
Compared to the same quarter of the previous year, sales increased by 2.7 percent to just under 8.2 billion dollars (around 7.3 billion euros). The bottom line was a profit of $1.49 billion – after $1.44 billion a year earlier.
Investors were not impressed by the quarterly figures and the forecast: the share fell by a good eight percent in after-hours trading. The price had previously risen by more than 60 percent since the beginning of the year. With the writers and actors on strike in Hollywood, Netflix is likely to spend more free cash in the current quarter. So are other streaming services and TV stations in America.
There is fierce competition for users in the video streaming business, especially after more and more players entered the market with their own services: studios like Disney, Warner and Paramount, tech giants like Amazon and Apple. Netflix is one of the providers that want to attract less spending-happy users with a cheaper offer with advertising.