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Netflix’s crackdown on password sharing helped the streaming service beat Wall Street’s earnings forecasts, but its shares tumbled after it said it would stop regularly disclosing its subscriber numbers.
The company’s operating profit rose 54% in the first quarter as it added 9.3 million subscribers worldwide, showing that efforts to reduce password sharing launched last year have had longer-lasting benefits than some investors realized. they waited.
However, Netflix said Thursday that starting next year it will no longer reveal 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 is shifting its focus to engagement — the amount of time its subscribers spend on the service — while developing new pricing and revenue sources, including advertising.
“Each incremental member has a different business impact” with the new membership plans, Greg Peters, co-chief executive, said on a call with investors. “And that means the simple historical calculations we’ve all done – number of members times monthly price – are less and less accurate in capturing the state of the business.”
He added that Netflix will “periodically update” subscriber data when it reaches “significant milestones.”
Paolo Pescatore, an analyst at PP Foresight, said Netflix’s decision to no longer disclose quarterly subscriptions starting in 2025 “will not go well.”
“Never mind the company’s attempt to shift focus from subscribers to financials, net [subscriber] adds is the key parameter that everyone wants to see,” he said.
The latest results showed there was still room for growth as a result of the crackdown on passwords and the push into advertising, Pescatore added. Netflix said subscriptions at its ad-supported tier increased 65% from the previous quarter.
Before Thursday’s report, shares of the streaming pioneer had risen 30% this year, significantly outperforming the broader market. Shares fell 4.7% in after-hours trading after the earnings report.
Netflix executives have said their main goals include improving the variety and quality of their entertainment, including television shows, movies and games. It recently named Dan Lin as the new head of its film division.
“Even though we have made and are making great films, we want to make them better,” said Ted Sarandos, co-chief executive. He added that he doesn’t see the need to spend more money on content.
Netflix has pushed further into sports-related content, including a $5 billion deal to live stream World Wrestling Entertainment’s flagship Raw program in the United States over the next decade.
It also offers a live stream of a fight between Mike Tyson and Jake Paul in July, leading analysts to question whether the company plans to move further into live sports. “We are not anti-sports, but pro-profitable growth,” Sarandos said.
Netflix reported earnings of $5.28 per share, well above Wall Street forecasts of $4.51, while its subscriber count rose 16% to 269 million from a year earlier.
Revenue forecasts for the current quarter of $9.49 billion were slightly below Wall Street’s forecast of about $9.5 billion. But Netflix said it expects revenue growth of between 13 and 15 percent for the full year.
The company said it generated strong first-quarter engagement from subscribers in the UK 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 minutes.