Netflix’s password crackdown pays off

SAN FRANCISCO

Netflix has said subscriptions to the media streaming service climbed by nearly 6 million in the wake of its crackdown on password sharing.

The streaming giant finished the recently ended quarter with a total of 238 million subscribers and a profit of $1.5 billion.

The pickup in subscribers came as a potentially crippling writers and actors strike hits the U.S. entertainment industry, but with analysts saying Netflix is better positioned than its rivals to weather the storm.

Revenue came in lower than expectations with Netflix posting $8.2 billion in sales over the April to June period.

Netflix in May expanded its crackdown on users sharing passwords with people beyond their immediate family as it seeks to shore up revenue after a rough patch last year.

Earlier this year the company complained that more than 100 million households were sharing accounts at the service.

"Let's face it, the crackdown on passwords is working," Navellier and Associates chief investment officer Louis Navellier said of Netflix.

The company said that the policy would expand to all its markets worldwide.

To convert non-paying users, Netflix has introduced "borrower" or "shared" accounts, in which subscribers can add extra viewers for a higher price or transfer viewing profiles to new accounts.

Netflix launched an ad-subsidized offering around the same time as the crackdown, and on July 19 eliminated its lowest priced ad-free plan that cost $10 a month in the U.S.

"The decision to cut its basic tier is an effort to bolster advertising by elevating the price difference between its advertising and non-advertising tiers," said Insider Intelligence principal analyst Ross Benes.

A Netflix ad-supported subscription is available in the U.S. for $7 monthly.

Benes estimates that Netflix will generate $770 million in advertising revenue in the U.S. this year, and more than $1 billion by 2024.