Netflix has outperformed Wall Street’s predictions for subscriber growth, thanks in part to a stricter password sharing policy and a cheaper ad-supported tier. In Q1, the company added an impressive 9.33 million subscribers worldwide, more than double what analysts had predicted. The success of this strategy highlights a larger issue of password sharing among users.
Netflix’s ad-supported tier, priced at $6.99 per month, has seen a 65% increase in growth quarter on quarter. Over 40% of new signups in markets that offer the ads tier are opting for this option. This suggests that the company is shifting towards monetizing freeloaders and turning them into paid customers.
Disney and Warner Bros. Discovery are set to follow suit with their own password-sharing limitations, with Disney+ expected to make changes this summer and Warner Bros. Discovery planning to take action later this year. Netflix’s approach is setting a precedent for its competitors.
Macquarie estimates that there are around 100 million users who share passwords, indicating significant potential for converting these shared accounts into paid subscriptions. While competitors may use Netflix’s crackdown as a roadmap, the company remains ahead of the curve in terms of subscriber growth and strategy.