Curbing shared passwords is working for Netflix. The leading streaming platform added 8.76 million new subscribers in the third quarter of the year, exceeding analysts’ expectations. The group now has a record 247.15 million paying subscribers worldwide, 10.8% more than a year ago, and is also benefiting from uptake of the advertising-supported service. After the success of this measure, Netflix is now determined to raise the subscription costs. The first hike, announced on Wednesday at the company’s quarterly results presentation, will affect the United States, the United Kingdom and France.
Netflix achieved record revenues of $8.5 billion in the third quarter of the year, 7.8% more than in the same period last year, according to figures published on Wednesday. Net income grew by 20%, to $1.68 billion. The company has been able to improve profit margins and increase cash generation. Investors have rewarded such solid results, with shares rising 12% overnight in after-hours trading.
The platform’s spike in subscribers is the largest since the second quarter of 2020, which took place in the middle of the Covid-19 pandemic. After a couple of years of sluggish growth, the company adopted a dual growth strategy that coincided with a transition at the top of the company. On the one hand, it put a stop to the use of shared accounts between members of different households that paid for a single subscription. And on the other hand, it launched a low-cost, ad-supported service. Both measures have worked and have allowed Netflix to stand out in a crowded market, while its competitors struggle. The company explained on Wednesday that 30% of new subscribers opted for the ad-supported service, which is available in a dozen countries.
In countries where it has taken action to prevent the use of shared passwords, the number of subscription cancellation has been lower than the company’s expectations. In addition, many of the households that used shared passwords are signing up. “As a result, we’re revenue positive in every region when accounting for additional spin off accounts and extra members, churn and changes to our plan mix. Going forward, we’ll continue to refine and optimize our approach to convert additional borrower households into either full paying members or extra members,” the company said in its shareholder letter. Netflix claimed that more than 100 million households are sharing accounts.
The company is trusting that subscriber loyalty is strong enough for it to raise prices. “While we mostly paused price increases as we rolled out paid sharing, our overall approach remains the same — a range of prices and plans to meet a wide range of needs, and as we deliver more value to our members, we occasionally ask them to pay a bit more,” said Netflix, which has decided to raise prices with immediate effect in the United States, the United Kingdom and France.
In the United States, the ad-supported ($6.99) and standard ($15.49) plans remain the same, but the price of the basic plan will rise to $11.99, while premium will jump to $22. .99. In the United Kingdom and France, the first two plans also remain the same (£4.99 and £10.99, respectively in the United Kingdom, and €5.99 and €13.49 in France), but the basic service will rise (to £7.99 and €10.99), along with the premium (£17.99 and €19.99). “Our starting price is extremely competitive with other streamers and at $6.99 per month in the US, for example, it’s much less than the average price of a single movie ticket,” said Netflix.
In its letter to shareholders, Netflix also referred to how the actors and screenwriters strikes that have affected the industry. “The last six months have been challenging for our industry given the combined writers and actors strikes in the US. While we have reached an agreement with the WGA, negotiations with SAG-AFTRA are ongoing. We’re committed to resolving the remaining issues as quickly as possible so everyone can return to work making movies and TV shows that audiences will love,” it stated.
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