Netflix (NFLX.US)'s move to crack down on password sharing could allow it to add about 6 million subscribers in the third quarter, laying the groundwork for price increases. Netflix, the only major profitable streaming company, has refused this year to join rivals such as Disney Inc in raising prices on ad-free subscription packages, instead limiting password sharing outside the home to attract more than 100 million viewers who don't subscribe to the service.
"Netflix is now very similar to a utility company in many markets," Bernstein analysts said. "The challenge with being labeled a utility company is how a mature company continues to seek growth."
There were media reports in early October that Netflix might increase the price of its subscription packages after the Hollywood actors' strike ends.
Five months ago, the Writers Guild of America (WGA) called a strike, causing chaos in Hollywood. Last week, the association approved a new contract with the major studios.
However, Netflix weathered the strike with its greater international reach and strong content offerings.
The ad program launched last year got off to a slow start, but analysts said they expect Netflix to raise the price of its ad-free subscription plans in the coming months to entice more users to opt for ad-supported plans.
Analysts say most Netflix viewers have so far opted for ad-free subscription plans following a crackdown on password sharing. Netflix's standard plan with ads costs $6.99 per month, while ad-free plans start at $15.49.
"Using these strategies, Netflix could double its ad subscription package customers next year," said Insider Intelligence analyst Ross Benes. He expects that over time, Netflix will show more ads to users and catch up with competitors.
VisibleAlpha estimates that in the third quarter ending in September, the advertising subscription package is expected to bring in approximately $188.1 million in revenue and add 2.8 million new subscribers.
Overall, Wall Street expects the streaming company to post its strongest quarterly subscriber growth this year, according to LSEG.
Crackdown on password sharing boosts subscriber growth
It is understood that Netflix will announce its third-quarter earnings after the U.S. stock market closes on October 18 (Wednesday). The market expects Netflix's revenue to increase by 7.7% year-on-year to US$8.54 billion; earnings per share will increase by 12.8% year-on-year to US$3.50.