Netflix’s Strategy Shift: Navigating Password-Sharing and Potential Price Hikes

Netflix’s efforts to combat password-sharing have proven effective, resulting in a substantial increase of approximately 6 million new subscribers during the third quarter. As the company prepares to release its earnings report, the success of this strategy has set the stage for potential price increases.

While most streaming platforms have periodically increased subscription prices, Netflix, as the only profitable one among major competitors, has refrained from doing so this year. Instead, it has focused on curbing password-sharing, a move aimed at converting the over 100 million viewers who access its service without subscribing.

Analysts have noted that Netflix is increasingly resembling a utility in many markets, which poses the challenge of maintaining growth for a maturing company. The recent Writers Guild of America (WGA) strike in Hollywood, which caused turmoil in the entertainment industry, has not significantly impacted Netflix due to its strong international presence and robust content offerings.

It’s worth noting that Netflix introduced an ad-supported plan last year, which initially had a slow start. However, analysts expect that Netflix will raise prices for its ad-free subscription options in the coming months to encourage more subscribers to opt for the ad-supported tier, which generates additional revenue per user.

So far, the majority of new subscribers who joined Netflix after the password crackdown have chosen ad-free plans. These ad-free plans currently start at $15.49, while the ad-supported plan with ads costs $6.99 per month.

Insider Intelligence analyst Ross Benes predicts that by using these strategies, Netflix is likely to double its ad-supported viewership next year. As the ad-supported tier gains momentum, it is expected to generate around $188.1 million in revenue in the third quarter alone, with an estimated 2.8 million new subscribers.

Overall, Wall Street anticipates that Netflix will report its strongest quarterly subscriber additions this year, with a 7.7% increase in revenue for the third quarter, reaching $8.54 billion. This growth is attributed to the platform’s strong programming, including the latest seasons of popular shows like “Sex Education” and “Virgin River.”