Netflix 1Q24 Earnings: Subscriber Growth & Password Sharing Impact

Netflix ($NFLX) released its 1Q24 earnings report last night. When such reports are released, headlines frequently connect any subscriber changes to the recent crackdown on password sharing. This analysis examines the actual numbers surrounding Netflix's 1Q24 earnings and the impact of its strategic changes.

Analyzing Subscriber Growth Post-Crackdown

The core question revolves around the significance of the password-sharing crackdown on subscriber figures. Netflix initiated this enforcement in the second quarter of 2023, implementing it rapidly across its major markets.

Considering 1Q23 as the final quarter before the crackdown, the company has since gained 37 million subscribers, reaching approximately 270 million subscribers recently, compared to 233 million in 1Q23. This represents about a 16% increase, a notable rise from the company’s pre-crackdown subscriber growth rate, which typically ranged from 4-6%.

The Counterfactual: Estimating Organic Growth

A counterfactual scenario exists where the company would have grown its user base organically, independent of converting previously shared accounts. Based on historical growth rates, our estimates suggest roughly a 10 million subscriber increase attributable to "normal growth" during this period. The underlying numbers and assumptions are detailed in the table below.

Regional Impact of Password Sharing Enforcement

Regionally, the impact of the Netflix password sharing crackdown on subscriber growth has varied. The APAC region showed the largest growth over the counterfactual at +20%. Surprisingly, Europe also saw a significant increase of +19%. The US / Canada region experienced the least benefit, with only 11% growth over the counterfactual.

For more in-depth data and calculations regarding Netflix's 1Q24 earnings and subscriber trends, please refer to our spreadsheet.

Check out our spreadsheet with the numbers and calculations for more details