Netflix has been cracking down on password sharing globally and the move appears to be working in favour of the company as it has delivered subscriber growth in the second quarter. The company has gained 5.9 million subscribers, after losing nearly one million customers in the year-ago quarter. “The cancel reaction was low,” the company told investors on Wednesday.
The move was something the company couldn’t ignore. There was a time when Wall Street overlooked heavy losses companies made as long as new subscribers joined in. When the economy cooled, investors became more focused on profits. Plus, competition is always on the rise, with Disney and others battling out with Netflix for customers.
Meanwhile, Netflix has raised its free cash flow forecast to $5bn from an earlier estimate of $3.5bn because the Hollywood writers’ and actors’ strike may make Netflix spend less on content this year, according to the BBC. “This strike is not the outcome that we wanted,” co-CEO Ted Sarandos said.
According to the company, more than 100m households have been participating in password sharing. The crackdown will only help bring in more subscribers. The new policy bars the number of people outside of the primary account holder’s home that can share a subscription. If password is shared, then the account owner has to pay more to do so.
Earlier in the week, Deutsche Bank analysts predicted that an increase in “paid sharing” would boost Netflix’s revenues through 2023. New sign-ups exceeded subscriber cancellations in the quarter and that’s a healthy sign.