Netflix reaps benefit of password sharing crackdown in Q2
Details
Editor
| 20 July 2023
Having introduced in selected countries in May 2023 what was seen as a controversial paid sharing programme, Netflix has revealed that it has seen higher revenues with service sign-ups already exceeding cancellations, resulting in a solid second quarter of 2023.
Netflix tablet android ui 30March2023
For the three month period ended 30 June 2023, the subscription video-on-demand (SVOD) leader, the company saw 5.89 million global paid net additions bringing its total to 238.29 million, a year-on-year increase of 8%, three percentage more than in the first quarter of 2023 and double that of Q4 2022. More pointedly, Q2 2023 made a stark contrast the situation a year ago when Netflix shocked the industry after seeing a fall of around a million subscribers.

Paid sharing represented 80% of Netflix’s Q2 revenues of $8.187 billion, up 2.7% compared with the same period a year ago. Revenue growth was driven by a 6% increase in average paid membership, even as ARM declined 3% year-on-year through a combination of limited price increases over the past 12 months (leading up to the launch of paid sharing), timing of paid net additions (primarily late in the quarter due to the May 23 rollout of paid sharing in Q2), and a higher mix of membership growth from lower ARM countries.

The rising revenues were the driver for an operating profit of $1.827 billion, up 16% annually. Operating margin was 22%, compared with 20% in Q2’22. Both were slightly ahead of Netflix’s beginning-of-quarter forecast, attributed to ongoing expense management, slower-than-projected headcount growth and timing of content spend.

Going forward, Netflix expects revenue growth to accelerate in the second half of ‘23 it starts to see the full benefits of paid sharing – which is being rolled out to almost all of the remaining countries - plus continued steady growth in its ad-supported plan. For Q3, it was forecasting revenue of $8.5 billion up 7% year-on-year, driven by growth in average paid memberships.