Netflix Plans US Rollout of Limits on Password Sharing
In a letter to investors Tuesday, Netflix announced it would roll out its plan for limiting subscribers’ ability to share passwords outside of their households in the US by July. Limits on password sharing have been trialed in other countries.
Facts
- In a letter to investors Tuesday, Netflix announced it would roll out its plan for limiting subscribers’ ability to share passwords outside of their households in the US by July. Limits on password sharing have been trialed in other countries.1
- The announcement comes at the same time Netflix announced a 1.75M increase in subscribers for the first quarter of 2023, which outperformed analysts' predictions but was historically low for a Q1 result.2
- Netflix shares dropped 11% in after-hours trading in response to the report before gaining 1.4%. First quarter earnings per share hit $2.88 with revenue of $8.162B, roughly in line with analyst predictions from Refinitiv.3
- Although it’s anticipating an increase in cancellations in response to the new password-sharing rules, Netflix also believes revenues will benefit from monetizing the 100M users it says currently share passwords.4
- This follows Netflix's previous attempt to increase its subscriber base and revenues by instituting different pricing tiers for HD viewing and offering an ad-supported option.4
- Netflix also announced it would end its 25-year-old mail-in DVD business in September, which accounts for 0.5% of its revenue but was costing the company because it had to continue buying new DVDs.5
Sources: 1BBC News, 2Associated Press, 3Reuters, 4Forbes, and 5Axios.
Narratives
- Narrative A, as provided by The Verge. "Never bet against Netflix" has always been a disruptor in the entertainment industry. With the way it distributed DVDs and then increased the prominence of streaming, Netflix changed Hollywood forever. Now, it’s adding games to its service and cracking down on password sharing. Together with the success of its ad-based service, these moves should keep Netflix a powerhouse for years to come.
- Narrative B, as provided by New York Times. After failing to meet Wall Street’s expectations in the first quarter of the year, Netflix will face even more obstacles in the coming months, including a looming writer’s strike, competition from other streaming services, and a misstep in its attempt to create live programming. In order to succeed, Netflix has to prove it can meet these challenges and find ways, beyond the ad-based tier and the password-sharing crackdown, to innovate and grow.
