Netflix’s stock (NFLX) saw a considerable boost of more than 3% last Friday, following fresh data from the analytics platform Antenna. The company recorded an unprecedented surge in US sign-ups following its controversial password-sharing crackdown, which was implemented in May. This was the largest increase in subscriptions in at least four and a half years. Between May 25-28, Netflix experienced the four single biggest days for US signups since Antenna started tracking this data in 2019. Notably, the streaming giant observed nearly 100,000 daily sign-ups on both May 26 and May 27.
Key Figures and Features
- The crackdown, which now extends to the US and over 100 other countries, has seen a significant rise in sign-ups, with the daily average reaching 73,000, a 102% increase from the previous 60-day average.
- Despite a small uptick in subscription cancellations during the same period, the number of new sign-ups vastly outnumbered this, resulting in an overall 25.6% increase in sign-ups compared to the prior 60-day average.
- New features like ‘Transfer Profile’ and ‘Manage Access and Devices’ have also been introduced as part of the new policy.
Restructured Policy and Customer Response
The restructured policy dictates that a Netflix account is to be used by one household only, with the provision to share their account with an external user for an additional $7.99 per month. Since the announcement, Netflix has been informing its customers of this change through emails and blog posts, emphasizing that their accounts are intended for use by the same household members only. While some customers voiced concerns over the new policy, many industry analysts remained optimistic about this initiative, seeing it as a long-term growth driver. JPMorgan, for instance, predicts that Netflix will monetize about 14 million of its password-sharing users by the end of 2023, 26 million by 2024, and 33 million by 2025.
Apart from introducing the password sharing crackdown, Netflix has also rolled out a new, more affordable ad-supported tier to boost its revenue. Analysts believe that Netflix’s ability to drive growth even amidst economic uncertainty stems from its capability to monetize its product better, potentially converting its 100 million plus password-sharing users into paying customers. These measures, along with the ad-supported tier, which attracted nearly 5 million subscribers within six months, are expected to drive the company’s subscriber and financial results.
Despite an initial dip after reporting its first subscriber loss in a decade, Netflix’s stock has been rebounding, reaching a 52-week high last Friday. As the password-sharing crackdown continues to gain traction in other global markets, industry experts anticipate the company to maintain this positive momentum. The company’s pioneering initiatives are expected to not only increase the number of paying subscribers but also influence industry practices.
Overall Impact on Subscriber Base and Industry
The policy change has notably impacted Netflix’s subscriber base, leading to a significant boost in sign-ups. Furthermore, it has sent a clear message to the wider streaming industry about the need for enforcing stricter sharing guidelines to ensure fair usage and revenue generation. With an estimated 100 million households sharing accounts, Netflix’s policy changes aim to convert a considerable portion of these users into paying subscribers. This strategic shift has the potential to transform the subscription model for the streaming industry at large.
Pivotal Research, in particular, believes that the company’s growth is not properly reflected in the current valuation, prompting an increase in their year-end 2023 target on Netflix’s stock from $425/share to a Wall Street high of $535/share. In conclusion, Netflix’s strategic move to regulate password sharing, along with the introduction of an ad-supported plan, has set the stage for a robust growth trajectory. The company’s innovative approaches demonstrate its commitment to maintaining its dominance in the streaming industry while adapting to changing market dynamics and consumer behaviors. As Netflix continues to navigate these new waters, it serves as a benchmark for others in the industry to follow.