Analysts Expect Netflix’s Password Sharing Crackdown Will Increase 2023 Earnings
By Movieguide® Contributor
Netflix’s recent crackdown on password sharing harmed the streaming service, as shares dropped 8% Thursday.
The news comes as a surprise to analysts who expected to see an increase given the boost in accounts after Netflix forced users to stop sharing passwords.
UBS analyst John Hodulik raised the estimated earnings after seeing “positive data,” adding, “We continue to believe paid sharing will drive 5%+ uplift to revenue and see the roll-out as key to driving scale in advertising with the growth in the ad-tier mix and better targeting.”
Per Variety:
Revenue for Q2 came in at $8.19 billion, shy of Wall Street’s $8.3 billion consensus expectations. And Netflix’s guidance for Q3 revenue of $8.52 billion also was less than the $8.9 billion average forecast by analysts. The company added 5.9 million net new subs in the second quarter, more than double expectations, and said it expects to add about the same number in Q3.
Netflix started charging users to share their passwords earlier this year and it quickly paid off — Variety reported that the streaming service saw “more than 3.5 million gross sign-ups in the U.S. alone.”
Sign-ups have soared globally as well, with CNN stating that Netflix saw “a net increase of 1.75 million global streaming subscribers in the first quarter, up nearly 5% from the same period in the prior year.”
Yet, the company is falling short.
“Without company disclosure around the number of ‘Extra Members’ being added to accounts as part of the password-sharing crackdown, the number of users that crackdown has even targeted so far or any insight into the number of subscribers on the Standard with Ads tier, the drivers underpinning Netflix’s revenue growth are more unclear than ever, giving us less confidence in our ability to accurately model this company,” MoffettNathanson principal analyst Michael Nathanson wrote in a note.
Movieguide® previously reported on Netflix’s plan to limit password sharing:
Netflix announced on Tuesday that it is planning to move forward with its password-sharing crackdown.
“Your Netflix account is for you and the people you live with – your household,” Netflix said in an email to its U.S. customers. To share an account with someone living outside of the household, Netflix will now charge a $7.99 a month fee.
This change in business model is rolling out across Netflix worldwide, having already been tested in a few key markets. Since February, Netflix subscribers in Canada, New Zealand, Portugal, and Spain have been disallowed from sharing accounts, requiring users outside of the household to pay for an additional account.
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