Netflix Gains Nearly 6 Million Subscribers As Paid Sharing Soars

A year after its largest quarterly loss and a significant drop in subscribers, Netflix has made a remarkable recovery by adding 5.9 million global subscribers in the second quarter of 2023, surpassing analyst expectations. TechCrunch reports: The subscriber addition far exceeds industry guidance; analysts forecasted an increase of 1.7 million subs. Netflix ended Q1 with 232.5 million users. Netflix's quarterly earnings results arrive a few hours after news broke out that the streamer dropped its basic plan in the U.S. and the U.K.

Netflix's significant subscriber gain this quarter reflects the impact of its paid sharing rules. Netflix wrote in its letter to shareholders, "In May, we successfully launched paid sharing in 100+ countries, representing more than 80% of our revenue base." The company added that today it's rolling out paid sharing to "almost all the remaining countries," including Croatia, Kenya, Indonesia and India. Netflix reported $8.2 billion in revenue and a net income of $1.5 billion.

The Junkies Couldn't Get Their Fix

[zenlessyank]

Gotta re-up!

Re:

[Fuck_this_place]

We're so doomed. Ah well, not me. I kicked the habit fully completely.

Nerdy types chestbanged and shouted loudly...

[williamyf]

... that they were "canselling their Netflix subscriptions becuase of the PAssword sharing crack". But when they latter renewed said subscriptions, the were whisper quiet in the forums and comments Who would have tought?!

PS: Never been a Netflix subscriber in my life. I do not say it as a badge of honour or anything. Simply the reality of the country I live in (Venezuela, very crappy internet, very crappy credit card access), and my particular tastes.

Re:

[Knightman]

Uhm, if they cancelled their subscriptions and later signed back up - that's a net-zero in users (and that is assuming everyone did that).

Re:

[Opportunist]

Nah, we mostly upped the ante and installed a VPN. Why would I cancel, it's not like anything changed.

Re:A WHOLE 6 MILLION!!?!

[StormReaver]

That's like... 1.7% of the US population?

That's a gain above and beyond their existing subscriber base of 220M+ subscribers, and in a single quarter. And in a single quarter where they were expected to do much worse.

Are you thinking that 6M subscribers is their total customer base?

It's easy to explain

[TheDarkMaster]

It is easy to explain the success of this model. Many of those users sharing passwords were friends or family of the account holders, and Netflix just gave them the option to have an "official sharing" for a reasonable price for each additional sharing (which here is actually less than a regular account, as long as it's associated with a someone's regular account, usually a family member or friend).

Loss, huh?

[kmoser]

Netflix reported $8.2 billion in revenue and a net income of $1.5 billion.

Was this $1.5 billion net income before or after all those new subscribers? Because even if it was before, a net income of $1.5 *billion* doesn't sound like a loss at all.

They suck lately.

[Eunomion]

What happened to the Netflix that made the Flanagan horrors and The Irishman? Get back to that and we'll talk.

maybe netflix started to bundle it

[raslin]

just changed provided of internet and surprise surprise after getting the SKY package for sky one(hopefully) Netflix was bundled in. so numbers may look good but i am either not paying for sky and or Netflix eather way. there new movies as not as good as the old stuff

Promotional deals explain everything

[Anonymous Cward]

Sure, they are technically making more money right now, but for how long? When mobile contracts, broadband and other unrelated services mysteriously include Netflix Premium as part of the sale, that still counts as a paid subscription. However, in this economic climate, service providers will want to retain customers by offering discounts and the best way for them to do that is to stop bundling Netflix when they cut their prices. When that happens, they will haemorrhage numbers as expected.

Re:Promotional deals explain everything

[DarkOx]

I think Netflix management is a step a head of the market there.

I really think that is the reason for the ad tier. The marginal cost per-subscriber for Netflix is quite low when there is no 'selling cost' ie the subscriber is brought to you by Verizon or someone else (whose selling costs now include your subscription). Netfix per subscriber costs probably becomes vanishingly small when its a low use user because said use only has Netflix because it was 'free' with their mobile and they look at it only very occasionally.

Netflix has an ad tier now thought. This affords them considerably new freedom. Before Wall Street wanted to see 'subscribers subscribers subscribers' because than meant growth and future revenue. Netflix probably has as many as they are going to get at this point, if you don't have Netflix by now its not because you don't know about it, don't have a device, etc - its because you are not interested enough to pay for it. Without real "revenue generating" subscriber growth the initial pivot to keep the investors happy was to pricing power - see we can charge more and people stay on the service!

The real reason to introduce the ad tier is they know they can only charge so much and after that people just are not going to pay or they will get more incidental subscribers - short term users who buy a month or two to watch some hit and then cancel. BUT what if they sell ads, the value of those ads is tied to (claims about) eyeballs. That gets us back to subscribers subscribers subscribers' again, and Netflix can continue to pump those numbers through those bundle deals, they can do that by converting those bundle packages (ultimately) to ad tier. With revenue divorced from the subscription price, they can make the bulk rates on subscripts however low it needs to be keep the Verizons and Comcasts of the world aboard, without rasing investor eyebrows. They pump the subscription numbers, charge more for ads based on those numbers, ...

TL:DR you won't see Netflix being included with service X.Y.Z go away you'll see it shift to Netflix Ad Tier.

And yet revenue growth didn't follow

[AnOnyxMouseCoward]

+6M new subscribers, but "average revenue per member fell 3% from a year earlier [reuters.com]". The stock is down over 8% as of 10am ET. You may have increased your number of subs by preventing password sharing, but maybe these subs are downgrading their plans (or you're only getting them in cheaper markets, and no longer in the US).

The strategy may end up being successful in the end, but it's true we're hitting saturation in the developed market. Most people don't have enough time to watch Prime, Netflix, and Disney+

That could have been from dvd subscribers

[Twipped]

Netflix finally terminated their dvd mailing service last quarter. All those remaining subscribers would have been motivated to sign up for streaming service.

Re:

[93 Escort Wagon]

Sigh... I still have fond memories of their DVD service - even though it sucked badly at the end. But for more than a decade it was a great deal.

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