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Netflix co-CEO on password sharing crackdown: ‘It was good to take it slow’

Netflix (NFLX) said its password sharing crackdown will continue to be a slow burn — and that's exactly what the company's aiming for.

"We're completely satisfied with the pace of it," co-CEO Ted Sarandos said at a UBS media conference on Monday, explaining the rollout was "deliberately slow" to account for various country-to-country learnings.

"How you nuance the language, how you nuance the offer, how you pace it out [to be] locally compliant with regulatory models — it was good to take it slow," he reiterated. "At our core, we're an A/B test culture. This kind of gives us a series of A/B tests that we could do around the world on this."

The company rolled out its password-sharing crackdown to US subscribers in May after first announcing the initiative in October 2022.

The stock has gained more than 20% since May — despite many users expressing their concerns over the controversial initiative.

Amid the crackdown, the company reported a surge in third quarter subscriber numbers of nearly 9 million, handily beating expectations of 6.2 million.

The company said the higher-than-expected growth was "due to the roll out of paid sharing, strong, steady programming and the ongoing expansion of streaming globally." The company had added just 2.41 million paying users in the prior-year period.

Netflix said it expects fourth quarter subscriber net additions "to be similar" to the third quarter's results.

In addition to password sharing crackdown, the company $6.99 ad-supported offering could one day be a major revenue driver for the company.

LAS VEGAS, NEVADA - NOVEMBER 14: Netflix CEO Ted Sarandos attends The Netflix Cup, a live Netflix Sports event, at Wynn Las Vegas Golf on November 14, 2023 in Las Vegas, Nevada. (Photo by David Becker/Getty Images for Netflix © 2023)
LAS VEGAS, NEVADA - NOVEMBER 14: Netflix CEO Ted Sarandos attends The Netflix Cup, a live Netflix Sports event, at Wynn Las Vegas Golf on November 14, 2023 in Las Vegas, Nevada. (Photo by David Becker/Getty Images for Netflix © 2023) (David Becker via Getty Images)

Netflix revealed last month its advertising tier has reached 15 million global monthly active users — one year after its launch and a significant increase from the 5 million users the company announced back in May.

"We're looking to diversify our revenue pool through advertising and getting that ad tier to scale," Sarandos said on Monday, although he cautioned it's still early days.

"We're a company that can get impatient. We're not in that space yet where it's just taking too long. It feels like it's building pretty organically and pretty nicely," he said, noting that about 30% of new sign-ups on the platform are for the ad tier. "That gives us good confidence that there is organic demand for it at the current price point."

The company recently hiked prices on certain plans in the US, UK and France — another bid to boost revenue and improve margins. It kept its ad plan and $15.49 Standard plan the same.

"There should be a measurable enough gap in between the two tiers so people can make good choices," he said.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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