The fight against shared accounts at Netflix is bearing fruit: the streaming service has gained almost six million customers in recent months. However, this is not reflected in the balance sheet.
Netflix added 5.9 million subscribers in the second quarter — triple the expected number. So far, the video streaming giant’s calculations against the sharing of passwords outside of a household have worked out. The company did not provide any information on how many of them were previously account free riders who now have their own account. However, each region has more subscribers and sales than before, said co-chief executive Greg Peters. “We see that it works.”
Additional costs or new account when sharing passwords
Since the beginning of the summer, Netflix has been taking action in Germany, among other places, against users sharing an account across a household. Additional money is now 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 a month. This is how much the cheapest subscription with advertisements costs in Germany.
According to earlier calculations by Netflix, around 100 million 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, the group 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.
Despite the influx of customers more reserved outlook
However, the surprisingly high influx of customers is not reflected in the balance sheet as hoped. The streaming service announced quarterly revenue below market expectations. The outlook for the current quarter was also disappointing. “While we’ve made steady progress, we still have more work to do to accelerate our growth,” the company said.
According to the information, sales increased by 2.7 percent to 8.2 billion dollars in the past quarter. However, analysts had hoped for $8.3 billion. The profit, on the other hand, surprised positively at 1.5 billion dollars. For the current quarter, Netflix announced revenues of $8.5 billion, $200 million less than experts had forecast.
The share then fell in after-hours trading by three percent, at times even by a good eight percent. Previously, the price of the paper had risen by more than 60 percent since the beginning of the year.
Fierce competition in the streaming business
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. And this approach seems to be working.
Because at Netflix, the number of users of the tariff has almost doubled within three months – albeit from a lower level, it said. Thanks to the advertising revenue, Netflix is already making more sales per user in the advertising subscription than in the ad-free basic version. In the USA, the revenue per user in the advertising model, which costs $6.99 there, even overtook the standard subscription for $15.49.
With the Disney+ streaming service, 40 percent of new customers recently opted for the cheaper version with advertising, as CEO Robert Iger recently said. Netflix now wants to become as attractive as possible for advertisers. Among other things, they can only book advertising space in the ten most popular films and series – which guarantees a wide audience.
Industry suffers from strike screenwriters and actors
Meanwhile, Netflix, like the entire film and television industry, is suffering from the double strike by US actors and screenwriters in Hollywood. This brought numerous productions to a standstill. That’s why Netflix will spend more free money in the current quarter. So are other streaming services and TV stations in America.
But the strike also means a gap in the supply of films and TV series. If the walkout continues into September, “it will be a real problem,” said industry analyst Michael Nathanson on CNBC.
The industry is preparing for it. For example, Paramount wants to fill the gaps in the program of its broadcaster CBS with episodes of the series “Yellowstone”, which is actually a driving force for Netflix’s in-house competitor Paramount+. Netflix, with a large library of movies and series, and production studios spread around the world, is seen in a better position than some of its rivals.