6 million reasons why Netflix's password crackdown is here to stay

If you were hoping that Netflix's password crackdown would be a failure we've got bad news: Netflix has beaten Wall Street's expectations and added nearly six million new subscribers in the US while cracking down on password sharing. That's an 8% increase over the same quarter last year.

According to the firm's latest financial reports, which it revealed this week, paid subscribers increased by 5.89 million during the quarter that ended on 30 June. 

That’s over three times what analysts expected: one of the more generous predictions was that Netflix would gain 1.7 million new subscribers. So the champagne is probably popping at Netflix today. The firm expects similar numbers in the next financial quarter.

Where are the new Netflix subscribers coming from?

Netflix doesn’t include extra family or friend accounts as separate subscriptions – so for example if you’re a subscriber and you add a family member to your plan, that’s still a single subscription as far as Netflix’s reporting is concerned. That’s probably to help boost ARPU (Average Revenue Per User), which is one of the key bits of financial information investors like to see: the higher the ARPU, the happier the investors tend to be.

A significant number of the new sign-ups won’t be people finding themselves booted off other people’s accounts; they’ll be new sign-ups, particularly those on the relatively new ad-funded plan that offers the cheapest Netflix subscription. 

While it isn’t giving specific numbers, Netflix has said that the number of new sign-ups is vastly exceeding the number of people cancelling their accounts. Although “we’re still in the early stages of monetization,” Netflix says, “we’re seeing healthy conversions of borrower households into full paying Netflix members as well as the uptake of our extra member feature.”

It’s not all good news for the streaming service, however. The writers’ and actors’ strike has effectively shut down production of many new shows and promotion of many more, which could make new Netflix accounts a harder sell as new content dries up: expect to see a lot more reality TV. And Netflix has also killed off its basic streaming plan in the US and UK, which may have a negative effect on subscriber numbers too.