Daily U.S. sign-ups for Netflix (NFLX.O) have jumped in the first few days since the streaming giant’s password-sharing crackdown came into effect on May 23, data from research firm Antenna showed. The company, which had estimated that more than 100 million households share their log-in information with friends and family members, now charges those people to keep their account active if they do not pay for their membership.
The company also lowered the price of its basic plan by $2 to $4.99 per month and added a new tier offering an ad-supported option for $8 a month. The move to regulate the sharing of accounts by requiring each household to pay for its membership is meant to boost revenue in a crowded and increasingly competitive market for online video entertainment.
It is too early to see how the password crackdown will impact Netflix’s paid membership numbers or its average revenue per member, which it measures each quarter. In its Q1 quarterly earnings report, the company noted that “paid membership growth accelerated in North America and Latin America, where password sharing is more prevalent than in other regions.”
Amid a slowing economy and a saturated market for video streaming services, Netflix has been homing in on ways to make money. In 2022, the company lost customers for the first time in a decade. It has since boosted its subscriber base and launched a lower-cost ad-supported tier to bolster its bottom line.
In addition to implementing the password-sharing guidelines, Netflix has begun to crack down on those abusing its service. It has begun to warn users knowingly violating its terms of use that they could be subject to account suspension. It has also made it easier for subscribers to break up their shared accounts by offering a feature to transfer their profile and watch history to a new account.
Although the password-sharing crackdown has been met with some consumer backlash, it has the desired effect of boosting subscriptions. Antenna’s data shows that the day after Netflix alerted its U.S. subscribers about the change, the company recorded nearly 100,000 daily sign-ups on May 26 and May 27, more than the highest daily sign-ups seen during the COVID-19 lockdowns in March and April.
Adding more subscribers to its pay-per-month memberships will increase its top-line revenue and improve profitability, which could allow the company to further invest in content and expand into new markets. The positive news sent shares of the company up 2.3% to $418.92 in early trading. The stock is up more than 40% year-to-date. Netflix has faced stiff competition from Amazon’s Prime Video service, which offers free shipping to its subscribers and has a wide selection of popular television shows and movies. But the company is confident its long-term strategy will help it remain a leader in the streaming industry.
