Netflix’s recent efforts to crack down on password-sharing may have contributed to a substantial increase in subscribers, estimated at around 6 million during the third quarter.
The popular streaming service, known for its profitability in the industry, is anticipated to lay the groundwork for potential price hikes as it prepares to release its earnings report this Wednesday.
Netflix, which has refrained from following competitors like Walt Disney in raising its ad-free subscription prices this year, has instead focused on limiting password-sharing beyond household boundaries.
This strategic move aims to tap into the vast pool of over 100 million viewers who utilize its services without official subscriptions.
Analysts from Bernstein have noted that Netflix is beginning to resemble a utility in various markets. However, this shift comes with the challenge of maintaining growth for a matured company.
Speculation has arisen that Netflix may consider price increases once the Hollywood actors’ strike, which was called five months ago, concludes. Last week, the Writers Guild of America (WGA) approved a new contract with major studios.
Netflix, due to its extensive international presence and strong content lineup, has managed to weather the strike effectively.
Despite a somewhat slow start for its ad-supported plan introduced last year, analysts believe Netflix is poised to raise prices for its ad-free options in the near future to encourage more subscribers to opt for the ad-supported tier, which generates greater per-user revenue.
Following the password crackdown, most new subscribers have chosen ad-free plans, with prices starting at $15.49, while ad-inclusive plans are available for $6.99 per month.
Ross Benes, an analyst at Insider Intelligence, expects Netflix to double its ad-supported viewership in the coming year using these strategies. Additionally, Netflix is anticipated to increase the frequency of ads shown to users over time, catching up with its competitors.
In the third quarter, the ad-supported tier is projected to bring in approximately $188.1 million in revenue, with an estimated 2.8 million new subscribers, as per Visible Alpha estimates.
Overall, Wall Street anticipates that Netflix will report its most robust quarterly subscriber growth of the year, with revenue in the third quarter potentially rising by 7.7% to reach $8.54 billion.
This growth is attributed to the success of strong programming, including the latest seasons of popular series like “Sex Education” and “Virgin River.”