Netflix Earnings: Uneventful Quarter Overshadowed by Rollout of Paid Sharing, aka Password Crackdown

Netflix posted a quiet start to 2023, adding only 1.75 million net subscribers, well short of our estimate. The firm announced a number of initiatives including shutting down its legacy DVD mail rental business at the end of September. Management also disclosed that the password sharing crackdown—paid sharing—will roll out to most of the world in the second quarter, including the U.S. While no details were provided, we expect the program in the U.S. to look almost identical in pricing and structure to the one in Canada that cost CAD 8 per extra member slot, with one slot available on the standard plan and two on the premium plan. We still believe this plan will boost revenue, but we remain skeptical that it will significantly increase new subscriber growth from users left off existing plans. We keep our $315 fair value estimate.