Industry analysts had been eagerly awaiting the Q2 earnings report from Netflix, as it would give the first indication of the impact of Netflix’s password crackdown on the key metrics of subscriber count, revenue, and average revenue per user (APRU).
When it arrived this week, the report showed that the company’s initiative has been a solid success so far, albeit with a few mixed results. Netflix added 5.9 million new subscribers during the past three months, most of whom signed up for their own account after having previously used the password of a family member or other named subscriber. After this increase, Netflix now has 75.5 million subscribers in the U.S. and Canada and 238M worldwide, by far the largest number of any streaming platform.
While the subscriber count was higher, the company registered slightly lower profits than analysts had expected. It’s likely that a disproportionate number of these new subscribers were opting for Netflix’s cheaper, ad-supported tier of service, priced at only $6.99 a month. While this resulted in lower profits per subscriber in the short term, a build-up in the audience that sees ads will help Netflix attract more brand advertisers over time. It’s also worth noting that Netflix is the only major streaming platform that is generating a profit, with all others hemorrhaging hundreds of millions of dollars each quarter.
Netflix eliminated its cheapest ad-free plan which charged subscribers $9.99 per month. Over time, the result should be to drive up the company’s Average Revenue Per User, as customers are diverted into either the more expensive ad-free plans, Standard at $15.49/month and Premium at $19.99/month, or the less expensive ad-supported plan at $6.99/month which will bring additional income from advertisers.
