Netflix: 1Q24 Earnings Report and Password Sharing Crackdown
Commentary

Netflix: 1Q24 Earnings Report and Password Sharing Crackdown

| 2 min read | by Alex Hoffmann
Financial Times Headline on Netflix 1Q24 Earning Report, 19 Apr 2024
Financial Times Headline on Netflix 1Q24 Earning Report, 19 Apr 2024

Netflix ($NFLX) released its earnings last night. When they do that, one thing is sure: headlines will link any change in subscribers to their recent crackdown on password-sharing.

So, how significant is the impact of password-sharing on subscriber numbers? The company started its crackdown in the second quarter of 2023 and rolled it out in its major markets rather quickly.

Assuming 1Q23 is the last quarter pre-crackdown, the company has gained 37m subscribers, or about 16% (270m subscribers recently vs. 233m in 1Q23). That’s an increase from the company’s pre-crackdown subscriber growth rate of around 4-6%.

Netflix 1Q24 Development of Members Figures. Source: Company, Marvin Labs
Netflix 1Q24 Development of Members Figures. Source: Company, Marvin Labs

However, there is a counterfactual where the company has been growing its user base outside of converting previously shared accounts to new users. Based on historical growth rates, we estimate a roughly 10m user increase by “normal growth” during that time (see the numbers and assumptions in the table below).

Netflix 1Q24 Development of Members Chart. Source: Company, Marvin Labs
Netflix 1Q24 Development of Members Chart. Source: Company, Marvin Labs

Regionally, the growth impact of the password-sharing crackdown has been the largest in APAC (+20% growth over the counterfactual) and, surprisingly, in Europe (+19%). The US / Canada region benefitted the least, with only 11% growth over the counterfactual.

For more in-depth data, check out our spreadsheet with the numbers and calculations for more details.

Alex Hoffmann
by Alex Hoffmann

Alex is the co-founder and CEO of Marvin Labs. Prior to that, he spent five years in credit structuring and investments at Credit Suisse. He also spent six years as co-founder and CTO at TNX Logistics, which exited via a trade sale. In addition, Alex spent three years in special-situation investments at SIG-i Capital.

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