Netflix reports positive earnings reports even as Hollywood strikes loom large

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Netflix released a blockbuster-style earnings report Wednesday, July 19, 2023, even as the TV and film industry is in chaos and it implemented a password-sharing crackdown.

The streamer reported adding 5.9 million subscriptions in the second quarter of 2023.

That figure is key after Netflix rolled out a password-sharing initiative in the U.S. and U.K. after testing it in other parts of the world.

Despite worries that the system, which attempts to detect when a user might be sharing an account with someone outside their household and allows the primary account holder to add a secondary account at a discounted rate, would spur cancellations, those concerns appear to be largely unfounded.

In fact, Netflix said that its signups are exceeding cancellations and it will roll out the “paid sharing” system worldwide.

The positive growth was also good news after the streamer reported a subscriber loss in 2022.

Despite increased revenue from the new system, the company missed Wall Street’s expectations slightly, recording $8.19 billion against the $8.3 billion analysts were expecting.

Net income for the quarter was $1.49 billion, up 3% year over year.

Looking forward, Netflix says it expects $8.5 billion next quarter, which will still fall short of the $8.7 billion Wall Street expects. It also predicts it will continue the trend of increasing net paid subscriptions in the third quarter.

Netflix has notably been the only major streamer to make significant moves to crackdown on password sharing.

The practice is typically against the terms of service of most streamers but it is largely the “worst kept secret” in the industry. Many streamers do limit the number of simultaneous active viewers at any time, however, which can limit account usage to some extent.

It’s likely that other streamers are watching Netflix’s efforts closely, especially given that it also has now been shown to be effective in boosting revenue.

Many streamers had been focused on growth over profitability, a trend that has shifted as costs increase and the market becomes more crowded.

Meanwhile, Netflix also noted that the dual WGA and SAG-AFTRA strike is not welcome news. Netflix is one of the major studios that is part of the Alliance of Motion Picture and Television Producers, an industry group that handles negotiations with key Hollywood unions, including the two striking ones.

Most productions using union talent and writers have been shut down due to the strikes. Many were shuttered or running on borrowed time when WGA went on strike in May 2023, with the SAG-AFTRA strike starting earlier in July 2023 taking out many of the remaining active productions.

It remains to be seen the overall effect of the two strikes. Netflix, like other streamers and major networks, rely heavily on unionized productions to create the content — both original and licensed — that it needs to offer subscribers. While content that’s already been released or filmed is less likely to be affected, the long term release schedule is already feeling the crunch, with many networks and studios adjusting release or premiere dates or postponing them indefinitely.