Netflix (NASDAQ:NFLX) has reported substantial growth in its subscriber numbers during the summer months, surpassing expectations set by industry analysts. The company’s ongoing efforts to crack down on password sharing are resulting in a higher number of former non-paying users converting to paid subscribers.
To further boost its revenue, Netflix has announced a price increase for its premium streaming service. The cost will rise by $2 to $23 per month in the United States, reflecting a 10% increase. Additionally, the lowest-priced ad-free streaming plan will see a $2 increase, reaching $12 per month. The $15.50 monthly price for Netflix’s most popular streaming option in the U.S. remains unchanged, as does the $7 monthly plan, which includes intermittent commercials. The price hikes will also affect subscribers in the U.K. and France.
During the July-September period, Netflix added nearly 8.8 million subscribers worldwide, marking a significant increase from the same period the previous year. This surge in subscribers has left Netflix with approximately 247 million global subscribers, exceeding the 243.8 million projected by industry analysts.
Netflix’s financial performance in this period also exceeded analyst expectations. The company reported earnings of $1.68 billion, or $3.73 per share, a 20% increase compared to the previous year, while revenue increased by 8% to reach $8.54 billion.
Following the release of these impressive quarterly numbers, Netflix’s stock price saw a surge of more than 12% in extended trading. This year has witnessed a 30% increase in Netflix’s shares, indicating the company’s strong performance in a competitive streaming market.
Notably, Netflix has gained over 16 million subscribers in the first nine months of the year, already surpassing the 8.9 million subscribers added throughout the previous year. However, this growth is a fraction of the 36 million additional subscribers acquired by Netflix in 2020, during the early stages of the COVID-19 pandemic when people sought entertainment options while confined to their homes.
Netflix’s success in gaining subscribers this year is even more remarkable considering ongoing labor disputes in the entertainment industry, particularly related to writers and actors receiving low payments from video streaming services. Netflix has navigated these challenges by relying on a backlog of completed TV series and movies in the U.S. and productions from international markets unaffected by labor disputes.
To strengthen its library of original programming as the world returns to normalcy, Netflix plans to invest around $17 billion in TV series and films next year.
Netflix’s decision to curtail the practice of password sharing, which allowed subscribers to share their accounts with friends and family outside their households, has resulted in more viewers signing up for their own accounts. This crackdown has also provided Netflix with a revenue boost, as existing subscribers can now share their accounts with individuals living outside their households for a higher monthly fee.
Netflix’s co-CEO, Greg Peters, expressed satisfaction with the password-sharing crackdown, predicting that it will continue to yield subscriber gains for several more quarters as the company addresses “borrower households” that have been watching its content without paying.
This success with the password-sharing crackdown now allows Netflix to explore other revenue-generating options, such as its low-priced plan with advertising introduced a year ago. While the inclusion of commercials has not significantly impacted the platform, some analysts believe that it will become more appealing to advertisers as they realize that Netflix’s data on viewer preferences can be used to target their ads effectively, akin to the strategies employed by tech giants like Google and Facebook.
Approximately 30% of Netflix’s new subscribers are opting for the $7 plan with commercials, making it likely to attract more advertising spending. Simultaneously, the higher prices for premium plans are expected to steer more subscribers toward the ad-supported option, marking a growing trend in the streaming industry that has been termed “streamflation,” characterized by price hikes, password-sharing limitations, and the introduction of ad-supported options to consumers.
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