Netflix: The impacts of last year's password sharing crackdown

Netflix (NFLX) rolled out a feature that would crack down on users sharing passwords to accounts nearly one year ago. According to the streamer's full-year subscriber count in 2023, this paid off as Netflix gained a wave of additional subscribers. Can Netflix keep up the gains or will consumers give up on the streaming giant as prices increase?

Yahoo Finance Reporter Alexandra Canal joins Wealth! to break down the impacts of Netflix's password crackdown policy ahead of its first-quarter 2024 earnings expected to come out after Thursday's market close.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Nicholas Jacobino

Video transcript

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BRAD SMITH: Netflix is set to report its fiscal first quarter earnings after the market close today. Investors are going to be eyeing the company's revenue initiatives, like its crackdown on password sharing, and it's been a little over a year since the streaming giant rolled out that feature, just how much has it impacted consumers' wallets. Yahoo Finance Senior Reporter Alexandra Canal here with more. Hey, Alex.

ALEXANDRA CANAL: Hey Brad. Yes, so in most simple terms, what does this mean-- it means all those Netflix freeloaders have now had to get their own accounts, and therefore, pay more now. Like you said, Netflix rolled out this initiative about a year ago. At the time, they said 100 million users globally were sharing accounts. Now analysts have said at this point Netflix has only scratched the surface on targeting those users, and that there's definitely more room to run when it comes to converting those members to paying subscribers.

And if you're a consumer, you have a few options here-- you have a cheaper ad-supported tier that costs 6.99, the standard plan ad-free at 15.99, then the premium plan which is also ad-free at 22.99. Now for me, I was hit with the password sharing crackdown. I will admit. I was on my parents account, and I did opt for the ad-supported tier because to me, I'm not paying 16 bucks to watch Netflix when you have all of these other services and subscriptions. So I said, OK, I'll pay the 6.99. Honestly, not too bad, I don't think the ad load is that crazy.

But that's really what this company wanted. They want those freeloaders that are converting to subscribers to opt for that cheaper ad plan because one, it builds up that offering. It is another way to monetize those users, and it will over time, increase average revenue per member, something that's been referred to as ARM, and that's a key profitability metric for Netflix. But a few weeks ago, we were talking about a report from Deloitte that said consumers subscribe to four streaming services and pay about $61 per month on just those streaming services. But that obviously depends on the tier plan. It depends on how much you want to take on as a consumer. So right now, although there's a lot of consumer choice, it is forcing users to pay a bit more than they probably were used to about a year or two ago.

BRAD SMITH: All right, we're going to be tracking shares of Netflix going into and coming out of that report as well. Ali, thanks so much.

ALEXANDRA CANAL: Yes, thank you.

BRAD SMITH: Appreciate it.