Netflix adds 5.9M subs amid crackdown on password sharing

Netflix saw streaming subscribers surge in the second quarter of 2023, fueled in part by the company's expanding crackdown on password sharing. But the company's stock didn't benefit much. The price was down more than 5% in after-hours trading Wednesday due to lower-than-expected revenues.

Netflix added 5.89 million streaming subs worldwide in Q2, versus a year-ago loss of -970,000. The additions sent Netflix's global total past 238.39 million. In the US and Canada combined, Netflix tacked on 1.17 million subs, expanding the regional total to 75.57 million.

Netflix attributed the general rise in Q2 subs to the expanded rollout in May of a "paid sharing" plan to 100 countries, representing about 80% of the company's total revenues. Revenues in those regions are now higher than they were prior to the launch of the paid sharing plans, "with sign-ups already exceeding cancellations," Netflix explained in its Q2 2023 investor letter (PDF). The company noted it is starting to see "the full benefits of paid sharing."

Netflix said it is now rolling out its paid sharing plan to most of the remaining countries where it sells streaming services.

Q2 revenues rose 3%, to $8.19 billion, off from the $8.30 billion expected by Wall Street. The company expects to pull in Q3 revenues of $8.5 billion, up 7% year-over-year.

'Steady growth' for ad-supported plan

Netflix also noted that it is seeing "steady growth" with an ad-supported subscription option launched in November 2022.

Netflix said its ad-supported options now deliver 95% "content parity globally" (by viewing) with its ads-free tiers. Advertisers have the ability to target media buys to Netflix's top ten shows and movies, a list that is updated daily.

Netflix still hasn't revealed how many subs are on the ad-supported plan but noted that the overall reach of the ad tier is still a "small" portion of the company's overall subscription base. However, Netflix said that the number of customers signing up for an ad-supported option has nearly doubled since Q1 2021.

"Building an ads business from scratch isn't easy and we have lots of hard work ahead, but we're confident that over time we can develop advertising into a multi-billion dollar incremental revenue stream," Netflix explained.

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— Jeff Baumgartner, Senior Editor, Light Reading