Netflix Subscriptions Spike after Password Sharing Crackdown: Would the Gains Sustain?

According to data provider Antenna, Netflix subscriber acquisition spiked after the company extended the password-sharing crackdown to the US. Would these gains sustain as Netflix aggressively goes after password sharing?

According to Antenna, since Netflix rolled out password sharing crackdown to the US on May 23, the streaming giant added the highest number of subscribers over the next four days since it started tracking the data four and a half years back.

Also, on May 26 and May 27, Netflix added over 100,000 new subscribers each in the US – which is even higher than what it saw during the initial days of the COVID-19 pandemic.

Notably, as cinemas and other outdoor entertainment activities were closed in the initial lockdowns many turned to streaming. Netflix for instance added 37 million new subscribers in 2020 and its total paid memberships rose above 200 million.

To put that in perspective, it added 27.8 million subscribers in 2019. However, after the lockdowns were gradually lifted, Netflix’s subscriber growth started to taper down and it added 18.18 million subscribers in 2021 which further fell to a mere 8.9 million in 2022.

Also, last year, Netflix lost subscribers in both the first and second quarters – the first time in a decade that its subscriber count fell.

Last year, the company announced two key initiatives even as it alluded to saturation in key developed markets.

Firstly, it launched an ad-supported tier which was quite a U-turn for the company as it always spoke against ads on streaming platforms.

Netflix Began the Password Sharing Crackdown Last Year

Secondly, it said that it would start cracking down on password sharing and emphasized that according to its estimates, nearly 100 million households globally watch its content through shared passwords.

To put that number in perspective, Netflix had just under 231 million paid subscribers at the end of 2022.

The company initially began cracking down on password sharing in Latin America and introduced it to Canada in the first quarter of 2023.

To be sure, Netflix admitted that password sharing crackdown won’t be “universally popular” and acknowledged “We’ll see a bit of a cancel reaction to that.”

It added, “We think of this as similar to what we see when we raise prices. So, we get some increased churn associated with that for a period of time.”

Netflix’s password crackdown is working.

It just led to sign-ups soaring by 102%, peaking at nearly 100K on May 26/27. 📈

Antenna reports it even outperformed the spike during COVID-19 lockdowns.

Sign-ups outpaced cancellations by 26%.

Did you see this coming? $NFLX pic.twitter.com/NPyqVNZ5W6

— App Economy Insights (@EconomyApp) June 9, 2023

However, it said that eventually the subscriber numbers rise and gave the example of Canada where its subscriber count rose after rolling out the password-sharing crackdown. It said that Canada was a “reliable predictor for the US.”

NFLX Has Over 5 Million Subscribers for Ad-Supported Tier

Last month, Netflix revealed that its ad-supported tier has surpassed 5 million subscribers.

While initially markets were apprehensive about the success of the tier and there were reports that the company refunded money to advertisers for failing to meet the minimum viewership targets, it has since seen good traction.

JPMorgan has a buy rating on Netflix stock and is bullish on the password-sharing crackdown. NFLX stock has risen almost 40% this year and hit its 52-week highs last week.

While there has been a broad-based rally in tech stocks, markets seem impressed with the performance of NFLX’s ad-supported tier as well as the password-sharing crackdown – both of which would help the company revive its growth.

It meanwhile remains to be seen how much more subscribers can Netflix add through the password-sharing crackdown. However, the program seems to have had a good start as is corroborated by the impressive rise in US subscribers after the rollout of password sharing crackdown.

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