Netflix subscribers at record high, password crackdown coming

The streaming television giant reported a quarterly profit of $1.3 billion, in line with expectations, but said it had delayed a broad crackdown on sharing of account passwords “to improve the experience for members.”

Netflix said it expects to begin rolling out its options for paid password sharing this quarter instead.

“It’s clear that the company wants to manage any fallout from the new strategy,” said Third Bridge analyst Jamie Lumley.

That means some membership and revenue benefits resulting from the move were postponed, Netflix said in a letter to shareholders.

Netflix has dabbled with “borrower” or “shared” accounts in a few markets, but plans to roll them out in the United States and elsewhere this month, co-chief executive Greg Peters said in a streamed earnings interview.

Netflix said it is taking time to make sure subscribers have seamless access to the service away from home or on various devices such as tablets, TVs or smartphones.

“We learned from this last set of launches about some improvements we can do,” Peters said.

“It was better to take a little bit of extra time to incorporate those learnings and make this transition as smooth as possible for members.”

And while a new ad-subsidized subscription tier at Netflix is in its early days, engagement is above initial expectations and Netflix has seen “very little switching from our standard and premium plans.”

Market tracker Insider Intelligence forecast that Netflix will bring in $770 million in ad revenue from the new tier this year, and that revenue figure will top $1 billion next year.

As growth at Netflix cooled last year, the Silicon Valley based streaming company focused on creating a lower priced subscription tier with advertising.

Netflix also set out to nudge people watching for free with shared passwords to begin paying for the service without alienating subscribers.

“This account sharing initiative helps us have a larger base of potential paying members and grow Netflix long term,” said co-chief executive Ted Sarandos.

Future of TV

For the first time ever, US adults will spend more time this year watching digital video on platforms such as Netflix, TikTok and YouTube than viewing traditional television, Insider Intelligence has forecast.

The market tracker expects “linear TV” to account for less than half of daily viewing for the first time ever.

“This milestone is driven by people spending more and more time watching video on their biggest and smallest screens, whether it’s an immersive drama on a connected TV or a viral clip on a smartphone,” Insider Intelligence principal analyst Paul Verna said in a release.

Netflix and YouTube are “neck and neck” leaders when it comes to digital video audience attention, according to Insider Intelligence.

Netflix planned to continue spending about $17 billion annually on shows and films, with that amount perhaps climbing after next year.

“Netflix subscriber growth shows that the streaming wars are still on,” said analyst Lumley.

“The company is ahead of where it was this time last year but still clearly facing the pressure from all the players in this crowded space.”