This is all very good for now, and it’s one heck of a turnaround compared to last year when Netflix lost tens of billions in stock value overnight. That moment proved to be a bit of a wake-up call for the industry at large, which had been chasing streaming as the unquestioned and only future. But even with these latest numbers, Netflix has a big problem that needs to be addressed in the not-too-distant future. Eventually, they’re going to hit a cap on subscribers and growth will no longer be possible. What happens when they inevitably hit that ceiling?
Unfortunately, the business model is predicated on growth, and that’s what Wall Street likes to see. For now, Netflix is doing everything it can to juice the subscribers they have. They recently decided to stop offering the Basic plan, leaving people to choose from the ad-supported plan or the Standard plan, both of which generate more revenue. It’s a good short term plan, but the fact remains that infinite growth is just not feasible, and they’re probably much closer to hitting a cap than they were a couple of years ago. Be that as it May, Netflix was very optimistic in the letter to investors.
“Now that we’ve launched paid sharing broadly, we have increased confidence in our financial outlook. We expect revenue growth will accelerate in the second half of 2023 as monetization grows from our most recent paid sharing launch and we expand our initiative across nearly all remaining countries plus the continued steady growth in our ad-supported plan.”
Without focusing too hard on the more distant future, in the here and now, Netflix managed to successfully execute this password-sharing initiative. Don’t be surprised if other streamers try something similar.