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Netflix (NFLX) Rolls Out Paid Sharing in the United States

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Netflix (NFLX - Free Report) recently announced its paid sharing model in the United States, alerting members that their accounts cannot be shared for free to users outside their households.

Members who want to share their account with someone outside their household can do so by either transferring the profile to a new membership or buying an extra member on their existing account by paying an additional fee of $7.99 per month.

Members with standard plans can add only one extra viewer, while premium subscribers can add up to two extra viewers. The extra member account must be activated in the same country where the owner created their account.

Paid sharing model is an integral step to tackle widespread account sharing, which erodes the company’s ability to invest and improve content for its paying members. Netflix already launched paid sharing model in Canada, New Zealand, Spain and Portugal in first-quarter 2023.

Netflix, Inc. Price and Consensus



Strong Portfolio to Aid Netflix’s Prospects

Netflix shares have grown 20.8% year-to-date, outperforming the Zacks Consumer & Discretionary sector, which gained 7.3% over the same time frame.

Netflix’s diversified content portfolio and its customer-centric focus has been a major growth driver in recent times. Hits like The Night Agent, The Glory, Full Swing and That 90s Show helped Netflix win subscribers.

Its global paid subscriber base in first-quarter 2023 increased by 4.9% year over year to 232.5 million.

It continues to serve a wider demography by producing original content with regional creators, writers, cast and production teams, reflecting its values toward diverse cultures.

Netflix’s revenues of $8.16 billion increased 3.7% year over year in first-quarter 2023, owing to strong content diversification and monetization initiatives.

Its monetization initiative includes the new ad-supported plan which has experienced higher user engagement. The plan focuses on key dimensions like member experience, value to advertisers and incremental contribution to business. It is also upgrading its ads experience with more streams and improved video quality to attract a broader range of consumers.

Netflix Suffering From Stiff Competition

Netflix has been suffering from stiff competition from the likes of Apple (AAPL - Free Report) , Warner Bros. Discovery (WBD - Free Report) and Amazon (AMZN - Free Report) in the saturated streaming market. Its average revenues per membership declined 1% year over year during the first-quarter 2023

NFLX shares have underperformed Apple, Warner Bros. and Amazon, which have risen 32%, 23.3% and 36.9% year to date, respectively. These companies continue to invest heavily in their streaming arm while focusing on revenue diversification.

Moreover, its initiative to roll out paid password sharing is expected to hurt subscriber growth in the near term.

This Zacks Rank #3 (Hold) company expects second-quarter 2023 earnings of around $2.84 per share, indicating a 20% decline from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

However, Netflix expects its second-quarter 2023 revenues to increase 3.4% year over year to around $8.242 billion.

The Zacks Consensus Estimate for second-quarter revenues is pegged at $8.25 billion, indicating a 3.47% growth from the year-ago quarter’s reported figure.

The consensus mark for second-quarter 2023 earnings remained unchanged at $2.80 per share in the past 30 days, indicating a year-over-year decline of 12.5%.

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