Last year, Netflix made a particularly risky bet by pressuring users who share passwords to create their own accounts, but it paid off.
Netflix, the dominant player in streaming, added more than 9 million subscribers in the first three months of the year, reaching a record 269.6 million subscribers.
“It added more subscribers than many analysts, including myself, expected,” said Ross Benes, senior analyst at eMarketer. “This indicates that password sharing was even more common than previously thought, as Netflix continues to convert free-riding viewers into paying users.”
While subscriber additions surpassed Wall Street estimates, the company still reported a drop in growth from its spectacular fourth-quarter report, when Netflix added 13 million subscribers. Netflix announced Thursday that it plans to stop sharing its quarterly subscriber numbers in 2025.
The company also reported $9.37 billion in revenue and earnings per share of $5.28 during the first quarter, beating Wall Street estimates, according to FactSet.
However, the stock, which has been a Wall Street darling this year, fell in after-hours trading.
Much of the company’s past growth and success, analysts say, is due to its longstanding, well-established business model. In recent months, Netflix has taken steps to expand and even radically reinvent its business in an effort to increase its profits.
As streaming competitors like Disney+, Hulu, Max (owned by CNN parent Warner Bros. Discovery) and Peacock work to attract subscribers with original programming, Netflix has been making big bets lately on live sports, video games and licensing deals. others. content from providers, all while moving from an ad-free subscription service to a full-fledged ad-supported behemoth.
For Netflix, last month’s Oscars were a disappointment: Although the streaming service beat its rivals in nominations, it took home only one award, for best live-action short film. Going forward, the company appears to be moving away from what it was known for: spending its money on developing big-budget movies and TV shows capable of winning those awards.
The company’s first-quarter letter to shareholders laid out several goals to “maintain healthy long-term growth,” including: “Improve the variety and quality of our entertainment, with more great TV shows and movies, a list more solid list of essential games and programs. live programming.”
In recent months, after “Suits” exploded in popularity on the platform, Netflix has indicated that it plans to license more content from other studios. New generations are rediscovering iconic shows from the ’90s and early ’90s, like “Seinfeld” and “Sex and the City” after they appear on the Netflix platform.
“They’re getting tons of viewership on both original content and licensed content,” said Alicia Reese, an equity analyst who covers Netflix for Wedbush Securities. “It’s productive and cheaper for them.”
Netflix has also expanded into live and sports programming this year, encroaching on traditional television’s dominance. In February, Netflix aired its first awards show, the Screen Actors’ Guild Awards, and announced a 10-year deal to stream “WWE Raw” live, valued at more than $5 billion.
In the fight for attention, Netflix has gotten creative and partnered with Rockstar Games’ “Grand Theft Auto,” the wildly popular action-adventure video game franchise, to further advance the gaming space.
“We’re excited about GTA’s performance,” Netflix co-CEO Greg Peters said in January. “We were at the top of mobile game downloads for several weeks, which shows that it was not only a great number for us, but also for mobile games in general.”
Reese has faith in Netflix’s new direction.
“Netflix has that winning formula right now,” he said. “They have a lot of content of various types that keeps people using the service at different prices.”
TV with ads, again
Reese said he believes Netflix also has other avenues for growth, including the company’s new ad-supported subscription tier.
The advertising tier, which costs $6.99 per month in the United States, significantly less than Netflix’s other subscription plans, has seen explosive growth since its introduction in late 2022, according to the company. In January, Netflix advertising president Amy Reinhard shared that Netflix’s advertising level had more than 23 million users.
While the company did not share an updated number of ad-tier users, in Thursday’s letter to shareholders, Netflix said its ad membership grew 65% quarter over quarter.
Reese said Netflix’s future growth could depend on its success in the advertising space.
In January, Peters said the company aimed to wrest more advertising dollars from traditional television competitors.
“We know that advertising money follows engagement. “We have the most engaged audience, so we believe we are well positioned to capture part of that advertising investment that goes from linear to streaming,” he stated.
Netflix will stop sharing quarterly subscribers
On the company’s earnings conference call, Netflix co-CEO Greg Peters discussed the company’s decision to stop sharing quarterly paid subscriber numbers starting in 2025.
“We have evolved and will continue to evolve, developing our revenue model and adding things like advertising and additional member features. Things that are not directly related to the number of members,” she said. “Therefore, each incremental member has a different business impact.”
eMarketer’s Benes said Netflix’s decision to stop sharing subscriber numbers allows the company to “quit while it’s ahead and emerge as the heavyweight champion of the world in subscribers.”
“Netflix is emphasizing what benefits them,” Benes said. “The increase in password sharing will eventually slow down and it will be very difficult to continue adding as many subscribers as they have added in the last few quarters.”