Netflix’s crackdown on password sharing is believed to have increased members by approximately 6 million in the third quarter, and the streaming pioneer is expected to pave the stage for price increases when it reports earnings on Wednesday.
Netflix, the only profitable major streamer, has resisted joining rivals such as Walt Disney in raising ad-free fees this year, instead limiting password sharing outside homes to target the more than 100 million people who use its service without subscribing.
“Netflix now closely resembles a utility in many markets,” analysts at Bernstein said. “The challenge of being labeled a utility is how a maturing company continues finding growth.”
According to a media story published earlier this month, it may raise rates following the end of the Hollywood actor’s strike.
Netflix’s strategy amid the Writers Guild of America contract and price hikes
The Writers Guild of America (WGA) approved a new contract with major studios last Thursday, five months after calling a strike that rocked Hollywood.
Netflix, on the other hand, has fared well throughout the strike due to its wider international footprint and good content slate.
Analysts predict that Netflix may hike the prices of its ad-free alternatives in the coming months to move more customers to the other tier, where ads help bring in more income per user, following a slow start for the ad plan announced last year.
According to researchers, most viewers who have subscribed to Netflix since the password crackdown have chosen ad-free subscriptions. Its normal ad-supported subscription is $6.99 per month, but ad-free plans start at $15.49.
“Using these tactics, Netflix will likely double its ad-supported viewership next year,” said Insider Intelligence analyst Ross Benes. He expects Netflix to show more ads to users over time, catching up with rivals.
According to Visible Alpha, the ad tier is expected to generate $188.1 million in revenue in the third quarter ended September, with 2.8 million new subscribers.
According to LSEG data, Wall Street expects the streamer to have its best quarterly subscriber increases this year.
Revenue is expected to rise 7.7% to $8.54 billion in the third quarter, the greatest gain in five years, mainly due to solid programming such as the newest seasons of “Sex Education” and “Virgin River.”