With the help of a crackdown on password sharing and a cheaper, ad-supported tier, Netflix has exceeded Wall Street’s expectations for subscriber growth in Q1. The company added 9.33 million subscribers worldwide, double what analysts had anticipated. This success indicates a wider 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 a shift towards monetizing freeloaders and converting them into paid users.
Disney and Warner Bros. Discovery are planning 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. The success of Netflix’s approach is setting a precedent for its competitors.
Macquarie estimated that there are around 100 million users who share passwords, indicating a significant market potential for converting these shared accounts into paid subscriptions. While the crackdown may give rivals a roadmap to follow, Netflix remains ahead of the curve in terms of subscriber growth and strategy.