Netflix’s crackdown against password sharing helped it to blow past Wall Street earnings expectations, but shares dropped after it announced it would stop regularly disclosing subscriber numbers.
The company’s first-quarter operating income grew by 54 percent as it added 9,3 million subscribers around the world, proving the benefits of its efforts to reduce password share that it launched last summer.
Netflix announced on Thursday, however, that it will stop disclosing its total number subscribers from next year. This metric has been an important benchmark for investors during the streaming age.
In a letter to its shareholders, Netflix stated that it would shift its focus on engagement, the time spent by its subscribers using the service, while also developing and implementing new pricing points, revenue sources, including advertising.
Greg Peters said on a conference call with investors that “each incremental member” has a different impact to the business with the new subscription plan. “And this means that the simple math we did in the past — the number members times the price per month — is less accurate at capturing the current state of the company.”
Netflix will “periodically” update its subscriber numbers when they reach “major milestones”.
Analyst Paolo Pescatore at PP Foresight said Netflix’s decision not to disclose quarterly subscriptions beginning in 2025 will “not go down well”.
He said that “no matter how hard the company tries to shift the focus from subscribers to finances, net [subscriber] additions is the main metric everyone wants” to see.
Pescatore said that the latest results show there is still room for growth due to its crackdown on passwords and push into advertising. Netflix said memberships to its advertising-supported tier rose 65 per cent from the previous quarter.
The streaming pioneer’s share price had increased by 30 percent this year before the earnings report on Thursday. This was a significant outperformance of the market. After-hours trading fell by 4.7 percent following the earnings announcement.
Netflix executives stated that their main goals were to improve the quality and variety of their entertainment including TV shows, movies, and games. Dan Lin was recently named as the new director of its film division.
Ted Sarandos said, “Even though our films are great and we continue to produce them, we still want to improve on them.” He said that he did not see the need to spend any more money on content.
Netflix is pushing more sports-related content. It has signed a $5bn contract to live stream World Wrestling Entertainment’s flagship Raw program in the US for the next decade.
Analysts have questioned whether the company intends to expand into live sports. It also offers a livestream from a fight between Mike Tyson vs Jake Paul, which took place in July. Sarandos stated that “we’re not against sports, but for profitable growth.”
Netflix’s earnings per share were $5.28, which was well above Wall Street expectations of $4.51. Its number of subscribers increased by 16 percent to 269 million from the previous year.
The Wall Street estimates of $9.5 billion for the current quarter were slightly lower than Netflix’s $9.49bn. Netflix has said that it expects revenue to increase between 13-15 percent for the entire year.
The company reported that Fool me Once had received 98mn viewers in the UK’s first quarter. Griselda, with 66.4mn viewers, and 3 Body Problem had about 40mn.