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Watch the party for free on Netflix.
The streaming company plans to crack down on password sharing next year, including by launching “sub-accounts” that allow members to let people outside their home access their services.
Netflix said Tuesday that it added 2.4 million new subscribers in the third quarter, a huge boost for a company that saw its once-dominant foothold crumble earlier this year: It’s in an overcrowded competitor space. It lost a lot of subscribers and gave up most of its business. business as it exited Russia.
But the company’s financial results pleased Wall Street, and its shares soared in after-hours trading.
“We’re still not growing as fast as we’d like,” Netflix Chief Financial Officer Spencer Neumann said on a conference call with investors on Tuesday. “So we’re building momentum. We’re happy with our progress, but we know we There is still a lot of work to be done.”
Now, the company is preparing to change its strategy, including exploring low-cost plans through advertising and trying to squeeze money out of the 100 million households who use Netflix by sharing login credentials and don’t pay for the service. Below is the impact on consumers.
– Why is Netflix having a tough year?
The streaming service, like dozens of companies, pulled out of Russia after the invasion of Ukraine, losing 700,000 subscribers. But as pandemic-era restrictions have receded and consumers have increasingly sought other entertainment options, the decline coincided with a broader decline in viewership.
At the start of the pandemic, Netflix gained 16 million subscribers in the quarter ended March 2020 and 10 million between April and June. But growth has slowed as coronavirus restrictions are lifted across the country and people seek entertainment outdoors.
However, Netflix made a strong comeback in the third quarter, doubling subscribers and exceeding revenue expectations.
– What does this mean for consumers?
Netflix plans to crack down on password sharing, including making people pay more to use the same account in different households.
The streamer said this week that starting in early 2023, many people who share accounts will be able to transfer their profiles, including shows they’ve watched and recommended, to new users. Account holders who share passwords with people outside the household will create “sub-accounts” to pay for them.
In March, Netflix began trials in Chile, Peru and Costa Rica, allowing members to pay about $3 to add sub-accounts for users who do not live with them. It also allows users in these countries to allow others who share their account to transfer personal data and view history.
It said this week that it would roll out the features “more broadly” early next year.
“Given that we’ve just rolled out feature testing in three countries, we first wanted to see how these features are progressing, which will inform how we can continue to monetize account sharing elsewhere,” Kumiko Hidaka, director of technical communications earlier this year At some point, Netflix told The Washington Post in an email.
Restricting users’ ability to share passwords could force some to pay for their accounts — but it could also prompt others to simply ditch Netflix and turn to any of the myriad streaming options.
Netflix COO Greg Peters said the company’s job was to “better convert” the value of non-paying consumers into income, while respecting families’ desire for flexibility.
“If you have an older sister, let’s say she lives in another city, and you want to share Netflix with her, that’s great,” Peters said on an earnings call with reporters earlier this year. “We’re not going to try to turn off that sharing, but we’re going to ask you to pay more to share with her so that she gets the benefit and value of the service, but we also get the viewing-related revenue.”
If Netflix could make money from roughly half of the 100 million households who don’t pay for its service, it would be worth as much as $1.8 billion, according to Moody’s senior vice president Neil Begley. He doesn’t think the policy change will cost Netflix any business, but only help its cash flow.
“If someone has been very aggressively borrowing someone’s password, it’s hard to say they should be outraged by the company’s actions now. It was never a free service,” Begley told The Post. “I don’t think people are jealous of companies doing this right now, especially when they see the statistics.”
– What kind of competition does Netflix face?
The days of Netflix being the all and end of online streaming are over. The company faces stiff competition from Hulu, Disney Plus, HBO Max, Amazon Prime Video, Paramount Plus, Peacock, and more. (Amazon founder Jeff Bezos owns The Washington Post.)
The market is so crowded that some emerging streaming services shut down before they even really stand up — even those with deep pockets.
CNN’s digital news-streaming service, CNN Plus, said it pulled out just a month after launching because it failed to attract enough subscribers. Despite an investment of about $1.5 billion, the much-hyped mobile streaming service Quibi shut down just months after its launch.
A crowded playing field means that the remaining streaming services have to attract viewers with a constantly rotating list of original shows, favorite movies and interactive content.
– Did the price go up again?
Not in the near future, Hidaka told The Washington Post in April, given the company raised prices in January.
Instead, Netflix is trying to increase its spread by offering a low-cost plan with some ads.
The company will launch its ad-supported program, called Basic, next month in more than a dozen countries, including the U.S. and U.K. The tier, priced at $6.99 in the U.S., will see four to five minutes of ads per hour, the company said.
Many of the same Netflix shows will be available, but the company says some will be excluded due to “licensing restrictions.”
“As anyone who follows Netflix knows, I’ve always been against the complexity of advertising and really like the simplicity of subscriptions. But as much as I love that, I prefer consumer choice,” CEO Reed Hastings said in a call with reporters earlier this year. “It makes a lot of sense for consumers who want lower prices and advertising tolerance to get what they want.”
The move will help Netflix expand into markets where customers may be on tight budgets, Begley told The Washington Post. It also reflects Netflix’s need to be nimble as it seeks ways to make money from its content, without the options of rivals like Disney and Paramount, which can monetize their offerings through theme park and merchandise revenue.
“They have to be more imaginative to grow from here,” Begley told The Washington Post, noting that Netflix already occupies nearly 300 of the world’s roughly 800 million pay-TV households.
– How does Netflix define “family”?
Hidaka said people who live together qualify as a family, whether it’s a two-generation family with parents and children, roommates or husband and wife.
“Flexibility is important, and we want to make sure members can easily use Netflix when traveling or living between two families,” Hidaka told The Post in an email.
The standard $15.49 per month plan (up from $13.99 in January) comes with five user profiles and allows two simultaneous streams. The $9.99 Basic plan allows for one active stream per account, while the $19.99 Premium plan allows up to four.
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