Netflix's Subscriber Growth Slows Following Reduction in Password Sharing

Netflix has reported a significant slowdown in subscriber growth, adding just 5.1 million subscribers during the July-September period, which marks a 42% decline compared to the same timeframe last year. This decline suggests that the benefits from the company’s crackdown on password sharing are beginning to diminish.

Despite the drop in subscriber growth, Netflix's revenue and profits for the quarter exceeded analyst expectations, earning $2.36 billion, or $5.40 per share, which is a 41% increase year-over-year. Revenue also rose 15% to $9.82 billion, and the company anticipates maintaining this growth rate in the upcoming quarter.

This quarter registered the lowest subscriber gains since early last year, indicating a transition phase for Netflix after successfully implementing a ban on account password sharing that allowed around 100 million users to access the service for free. The crackdown, initiated following subscriber losses in 2022, facilitated the addition of 57 million subscribers from June 2022 to June 2023, averaging over 7 million new users each quarter, unlike many competitors facing challenges in gaining subscribers.

Moreover, Netflix's growth was supported by a new low-cost ad-supported service. While this segment contributes a small percentage of overall revenue, Netflix is increasing its focus on this advertising model to further enhance its profits.