Netflix's Second Half Sees A Stronger Performance With Account-Sharing Curbs

Netflix Inc. will begin cracking down on US users who share someone else's account this quarter, with the company forecasting that plans to tax such consumers will improve growth in the second half of the year.

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The business, which reported a lower-than-expected subscriber increase in the first quarter, has been exploring methods to decrease account sharing in Latin America, and in the first quarter, it pushed out a plan to charge such customers in four additional countries. 

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According to Netflix, more than 100 million individuals utilize a free membership, and analysts see paid sharing as a big potential source of new subscribers or sales. In the first three months of 2023, the business is expected to start charging for password sharing in the United States. It now promises it will do so within the next several months. 

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After ending up 0.3% at $333.70 on Tuesday, shares slid 1.2% in premarket trade in New York on Wednesday. 

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Netflix increased its free cash flow prediction for 2023 to $3.5 billion, in addition to predicting a rise in the second half of the year. 

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The paid member client base is now greater in Canada, one of the regions where the corporation has clamped down.

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"Their comments on results in Canada seem to be better than some had feared," said Magalie Grossheim, senior analyst at M Science, a research subsidiary of Jefferies Financial Group Inc.

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In a letter to investors on Wednesday, UBS analyst John C. Hodulik raised the stock from neutral to buy. 

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Netflix might need some help. In the first quarter of 2023, the company added only 1.75 million users, falling short of Wall Street expectations. Investors anticipated 2.41 million additional clients. However, the business expected that new efforts like the password-sharing plan and a new tier of service with advertisements would allow "growth to accelerate throughout the second half of 2023."