The financial effects of Netflix’s (NFLX) ad-supported subscription tier and password-sharing crackdown, which were introduced last year, started to pick up speed during the third quarter.
The massive streaming company reported net income of $1.67 billion, up almost 20% from the same quarter last year and $3.73 per share. Despite only slight drops in average revenue per user (ARPU) due to speculation about impending price hikes, revenue increased by 7.8%, in accordance with analyst projections.
After gaining 5.9 million new members worldwide in the second quarter, Netflix’s subscription base increased by 10.8% year over year to 247 million.
That was the first time the company’s new paid-sharing option and its crackdown on password sharing were visible.
In a letter to shareholders sent out in the second quarter, the business stated that it anticipates these programs’ revenue benefits to pick up speed by at least the fourth quarter.
The business has also taken away the least expensive ad-free subscriptions in the United States and other countries, moving instead toward its ad-supported plan. Furthermore, after the Writers Guild of America strike ends, it intends to raise the cost of its remaining ad-free services.
However, consumers are sensitive to “streamflation,” with 39% of respondents stating they would quit their Netflix subscription in response to price increases. This comes from a recent CivicScience poll.
Before dropping to less than $200 in the early months of 2022, Netflix shares traded just shy of $700 in 2021. Since then, they have recovered, but in the late summer and early fall, they gave up part of those gains. However, as of October 18, shares had increased 42% over the previous year.