Netflix profit soars after a crackdown on password sharing

According to Netflix, the company’s earnings have skyrocketed in the first quarter of this year, with a reduction in password sharing being a contributing factor.

According to the data, Netflix’s subscriber count reached nearly 270 million, adding 9.3 million users in the first quarter.

According to the business, profits for the first quarter increased above $2.3 billion (£1.85 billion). However, the company will cease disclosing crucial subscriber data beginning in 2020.

Netflix prioritises profits over subscribers while revenue grows

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” the company wrote in a statement to shareholders announcing the move.

It further stated that the number of subscribers is now “just one component of our growth” and urged investors to concentrate on the company’s earnings and sales.

Its first-quarter revenue of $9.37 billion increased by about 15% annually.

The company also attributed a “drumbeat” of hits, including the crime drama Griselda.

Some investors interpreted Netflix’s abrupt decision to cease disclosing subscriber counts as indicating that the company’s rapid expansion of users may be halting.

Although the data showed a “very, very strong performance,” Simon Gallagher, a former Netflix director and current principal of the entertainment investment business SPG Global, warned that this would not remain. He made this statement on the BBC’s Today programme.

“There’s a definite tailwind from the crackdown on password sharing. We saw that last quarter. It’s continued into this quarter and will continue for another quarter or two, but there’s an expectation that it will end by this time next year.”

The former executive at Netflix stated that the company’s goal was for “people to move away from fixating on the subscriber numbers”.

However, the decision to stop disclosing subscriber data has sparked controversy among US experts.

“Questions about the growth prospects of Netflix’s subscriber base” are raised by the decision, according to Jamie Lumley of research company Third Bridge.

Netflix navigates growth challenges amidst industry turbulence

As growth halted, other tech behemoths like Twitter’s parent company Meta and Facebook also ceased disclosing monthly active user counts.

Since January, Netflix shares have risen almost 30%, nearing its 2021 peak. After the announcement, they fell roughly 5%.

“Maintaining customer funds in the streaming space is challenging due to the market’s volatility,” stated Sophie Lund-Yates, a lead equity analyst at share dealing platform Hargreaves Lansdown.

“One area in which Netflix has an edge is its original content slate, which is an excellent retention tool compared to repurposed shows and films.”

In 2022, Netflix last increased the cost of its well-liked “standard” package.

Following the change, Netflix experienced an unexpected decline in subscribers, which shocked investors and heightened worries that the company was losing its hegemony over the sector it had helped to pioneer.

Shortly after, the business announced that it would stop password sharing and introduce a new, less-priced plan featuring advertisements to spark development once again.

Along with expanding into new markets like sports and video games, the company is still licensing content from other media companies to increase its earnings.

According to analysts, the corporation also profited from its global reach, enabling it to continue producing new series even during last year’s Hollywood strikes, severely disrupting the industry.