Netflix has surpassed Wall Street’s expectations for subscriber growth, thanks to a crackdown on password sharing and the introduction of a cheaper, ad-supported tier. In Q1, the company added 9.33 million subscribers worldwide, double what analysts had predicted. This success highlights a larger issue of password sharing among users.
Netflix’s ad-supported tier, priced at $6.99 per month, has seen an impressive 65% increase in growth quarter on quarter. Over 40% of new signups in markets that offer this option are choosing it. This suggests that Netflix is shifting towards monetizing freeloaders and turning them into paying customers.
Disney and Warner Bros. Discovery are set to follow suit with their own password-sharing restrictions, with Disney+ expected to make changes this summer and Warner Bros. Discovery planning to take action later this year. The success of Netflix’s approach is setting a precedent for its competitors to follow.
Macquarie estimated that there are around 100 million users who share passwords, indicating significant market potential for converting these shared accounts into paid subscriptions. While the crackdown may provide rivals with a roadmap to follow, Netflix remains ahead of the curve in terms of subscriber growth and strategy.
Disclosure: Mathias Döpfner, CEO of Axel Springer, Business Insider’s parent company