Coinciding with its second quarter earnings report, Netflix announced that it gained nearly 6 million subscribers, surpassing analyst expectations, and totaling 238 million at the end of the quarter.
Netflix also boosted revenue as a result of charging a premium to account holders who share with previously non-paying viewers – called “account borrowers” by Netflix – and for launching a $7 ad-supported service tier; which have captured an estimated 100 million users worldwide.
Plugging the gaps
Soon, the $11 Netflix basic plan will be phased out for new subscribers but the $11 price will be honored for existing subscribers. Netflix is encouraging users to take its ad-supported tier, its $15.49/month Standard ad-free plan which allows one out-of-household user, or to the $19.99/mo. premium level which allows up to two out-of-household users. Add $7.99/month per household for additional users beyond those per-household maximums. (Prices are for the US).
The changes to date in its service mix and end user policies are working: boosting subscribership levels and adoption of ad-supported service have increased revenue. Whether their anti-piracy measures are stopping criminal enterprise is an answer that is known internally and to industry partners, but not by the public.
Adoption over time
“(T)he business impacts of (Netflix’) product experience will roll in over several quarters. So it’s not an overnight kind of thing,” said Netflix Co-CEO, President & Director Gregory K. Peters during the Netflix investor call. “Because, in part, the interventions are applied gradually and in part because some (account) borrowers won’t immediately sign up for their own account, but we’ll do so next month or 3 months or 6 months or maybe even longer down the line, as we launch a title that they’re particularly interested in.
“…Some borrowers are using the service every day. And those folks are very likely to transfer to their own accounts very soon. And then some folks are less engaged. And it’s going to take us a little bit longer to convince them to move over,” said Mr Peters
Netflix Second Quarter 2023 Earnings Interview. Press release with links to investor call transcript and financial statements. July 19, 2023. Netflix
Plans and Pricing. Web page. Accessed August 1, 2023. Netflix
Netflix subscriber numbers surge in sign its password-sharing crackdown is paying off. Article. July 20, 2023. ABC (The Australian Broadcasting Corporation)
Why it matters
The best measure as to whether anti-piracy measures have had an effect is by monitoring announcements by the MPA’s Alliance for Creativity and Entertainment (ACE). ACE’s wins often identify its members, which includes Netflix.
In the face of the current strikes by the actors and writers unions, anti-piracy is more important than ever, as Netflix must rely upon sustaining demand for titles in its current library.
This shines a brighter spotlight on the ongoing risk of theft by piracy, which the company can control by only so much.
Netflix has remained silent about the sources and methods of piracy (service and content theft, industrialized credential fraud) that it is certain to be fighting. Having to spread the cost of anti-piracy across its paying subscriber-base is unfair to legitimate subscriber and is not likely to address the full extent of the underlying piracy problem.
As the company itself is quick to point out, Netflix is one of the world’s largest entertainment companies, so even the smallest of policy adjustments or external factors have a significant impact.