Sharing is caring — Password crackdown leads to more income for Netflix Netflix to stop reporting subscriber numbers, prioritizing viewer engagement instead.
Christopher Grimes, Financial Times – Apr 19, 2024 1:28 pm UTC EnlargeBloomberg reader comments 12
Netflixs crackdown on password sharing helped the streaming service blow past Wall Streets earnings forecasts, but its shares fell after it said it planned to stop regularly disclosing its subscriber numbers.
The companys operating income surged 54 percent in the first quarter as it added 9.3 million subscribers worldwide, proving that the efforts to reduce password sharing it launched last year have had more lasting benefits than some investors expected.
However, Netflix said on Thursday that from next year it would stop revealing its total number of subscribers, a metric that has been a crucial benchmark for investors in the streaming era.
In its letter to shareholders, Netflix said it was shifting its focus to engagementthe amount of time its subscribers spend on the servicewhile also developing new price points and sources of revenue, including advertising.
Each incremental member has a different business impact with the new subscription plans, Greg Peters, co-chief executive, said in a call with investors. And that means the historical simple math that we all didthe number of members times the monthly priceis increasingly less accurate in capturing the state of the business.
He added that Netflix would periodically update on subscriber figures when it hits major milestones.
Paolo Pescatore, an analyst at PP Foresight, said Netflixs decision to no longer disclose quarterly subscriptions starting in 2025 will not go down well. Advertisement
No matter the companys attempt to switch focus from subscribers to financials, net [subscriber] adds is the key metric everyone wants to see, he said.
The latest results showed there was still room for growth as a result of its password crackdown and push into advertising, Pescatore added. Netflix said memberships to its advertising-supported tier rose 65 percent from the previous quarter.
Before Thursdays report the streaming pioneers shares had risen 30 percent this year, significantly outperforming the broader market. The shares fell 4.7 percent in after-hours trading following the earnings report.
Netflix executives said among their primary goals was improving the variety and quality of their entertainment, including television shows, movies, and games. It recently appointed Dan Lin as the new head of its film division.
Even though we have made and we are making great films, we want to make them better, said Ted Sarandos, co-chief executive. He added that he saw no need to spend more money on content.
Netflix has been pushing further into sports-related content, including a $5 billion deal to livestream World Wrestling Entertainments flagship Raw program in the US over the next decade.
It is also offering a livestream of a fight between Mike Tyson and Jake Paul in July, leading analysts to question whether the company plans to move further into live sport. Were not anti-sports, but pro-profitable growth, Sarandos said.
Netflix reported earnings of $5.28 a share, well ahead of Wall Street forecasts of $4.51, while its number of subscribers rose 16 percent to 269 million from a year earlier.
Its revenue forecast for the current quarter of $9.49 billion was slightly below Wall Street forecasts of about $9.5 billion. But Netflix said it expected revenue to grow between 13 and 15 percent for the full year.
The company said it generated strong engagement in the first quarter from subscribers in the UK with Fool Me Once, which had 98 million views. Other standouts included the drama series Griselda with 66.4 million views and 3 Body Problem with about 40 million.
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