Password sharing clampdown, Suits success add 8.8m new Netflix subs in Q3

US-based streamer Netflix added nearly nine million new global subscriptions in the last quarter following a clampdown on password sharing, but is still planning a price hike in its premium, ad-free packages.

Ted Sarandos

The streamer’s share price jumped 12% post trading yesterday when its latest quarterly result showed it had added 8.8 million new subscribers between July and September to reach 247 million globally, its best results for two years and substantially more than the six million that had been predicted. The quarter saw releases including season one of One Piece, season three of The Witcher and Top Boy and season four of Sex Education.

The improvement has largely been credited to the company’s clampdown on password sharing and adding an extra charge for having more than one household using the same account.

Despite the positive numbers, Netflix is pressing ahead with further price rises for its premium packages in key territories.

The ad-free plan in the US is going up US$3 to US$22.99 a month while its lowest tier plan without ads (no longer available to new sign-ups) is jumping from US$9.99 to US$11.99. In the UK the premium tier is increasing £2 (US$2.42) to £17.99 and €2 (US$2.12) to €19.99 in France. It means Netflix’s Premium is now more than £215 a year in the UK, compared to the BBC licence fee of £159.

The launch of cheaper packages that include adverts accounted for around 30% of the new sign ups, Netflix said in its latest letter to shareholders. Quarterly revenues were up 7.8% year-on-year to US$8.5bn and it registered a profit of US$1.67bn.

Looking forward, Netflix said it anticipates Q4 revenues of around US$8.7bn which would be up 11% on the same period last year and that subscriber numbers would grow at a similar level to Q3 bolstered by Christmas sign-ups.

Trouble may lie ahead in 2024 and beyond as the lagging effects of this year’s writers’ and actors’ strikes harm Netflix’s pipeline of originals. While the writers’ strike is officially over disputes remain about the use of AI, and actor’s union SAG-AFTRA remains on walkout. The next season of flagship Stranger Things is one of several prominent series that will have an extended delay, according to Parrot Analytics.

“The last six months have been challenging for our industry given the combined writers’ and actors’ strikes in the US,” Netflix said. “While we have reached an agreement with the WGA, negotiations with SAG-AFTRA are ongoing. We’re committed to resolving the remaining issues as quickly as possible so everyone can return to work making movies and TV shows that audiences will love.”

Co-CEO Ted Sarandos said in yesterday’s earnings call that the latest demand by the actors’ union for a portion of subscription revenue was a “levy” and would not be accepted.

The strikes have meant Netflix spent US$13bn on original content in 2023, US$1bn less than it expected, and that would up to US$17bn next year assuming the disputes are settled.

But much of Netflix’s Q3 success has been driven by library acquisitions. The streamer was quick to point to the success of Suits in its letter to shareholders and earnings call, saying a billion hours of the drama had been viewed on its service globally. Nine seasons and 134 episodes of the USA Network original were acquired from NBCUniversal and joined the platform at the end of Q2 having previously streamed on Peacock.

With the likes of Disney and Amazon starting to explore third-party licensing of its original content to boost profits, Netflix said it saw great potential in this area.

“Despite having been available on other streaming services, the debut of Suits on Netflix in July broke viewing records. According to Nielsen, Suits was the most-watched title across film, original TV and acquired TV on streaming in the US for 12 weeks starting in late June,” Netflix said in its letter to shareholders.

“Licensing has always been an important part of our programming strategy. As the competitive environment evolves, we may have increased opportunities to license more hit titles to complement our original programming.”