After cracking down on password sharing, Netflix is experiencing a jump in subscribers, something the company needs after losing subscribers last year.
Key Details
- Netflix’s new rules that limit the use of an account to one household may be frustrating customers who shared passwords, but it is not enough to drive consumers away.
- The company is experiencing a surge in subscribers, the likes of which it had not seen since the height of the pandemic when viewers were at home all day, The Wrap reports.
- In the four days since its password restrictions went into effect, the streamer booked more U.S. subscriptions than in any other four-day period since 2019, when data analytics company Antenna started tracking the data.
Why it’s news
As Netflix has faced more competition, the company has struggled to keep up. Before the crackdown, the streaming company estimated that around 100 million people used the service but did not have a paying account.
Netflix has been working to boost its profitability, and reducing the number of freeloading users is just one part of that plan. It recently added a less expensive streaming subscription service that included advertisements.
While the company’s plan to crack down on password sharing was met with skepticism, it appears to be paying off so far. In the four days after the company started preventing password sharing, it averaged 73,000 daily sign-ups, a 102% increase from the prior average, The Wrap reports. From May 26 to May 27, the company may have seen as many as 100,000 daily signups.
Though the increased number of subscribers is impressive, the company also had a high number of cancellations. There were more subscriptions than cancellations.
Netflix has tested its password restriction in Canada, New Zealand, Spain, and Portugal, but the restrictions in the U.S. are still new. The company saw success in those markets after imposing the password-sharing restrictions and expects to see the same results in the U.S.
Users can still share passwords across different households if they wish, however, they must also pay an additional $7.99 fee. The customers are also limited on how many households they can include depending on which service tier they are subscribed to.
Streaming on mobile devices is still simple. Users just need to connect to their home Wi-Fi once every 31 days. This will establish the device as a “trusted device” and allow users to stream content on the go.
Since initiating the crackdown, Netflix shares have jumped and are now trading at $420.03. The company hit its high of $424.65 earlier in the week, marking its highest point since January 2022.
Economists predict that Netflix’s new restrictions set it in a favorable position, leaving room for growth and profitability. The recently-added ad-supported subscription tier should increase the company’s revenue, The Wrap reports.
Last year, Netflix reported losing subscribers in the first and second quarters. This was the first time the streaming giant had lost customers. Since then, subscriber growth has increased slowly but steadily.
