Netflix added 9.3 million subscribers to begin the year, and its profit increased as a result of its still-emerging push into advertising, but investors were taken off surprise by a shift that will make tracking the video streaming service’s future development more difficult.
The performance released Thursday showed that Netflix is still building on its momentum from last year, when a crackdown on free-loading viewers using shared passwords and the introduction of a low-cost option with advertisements rekindled its growth after a post-pandemic lull.
Netflix Now Has Nearly 270 Million Subscribers After Another Strong Showing To Begin 2024
Netflix’s strategy resulted in 30 million new customers last year, the second greatest annual gain in the service’s history.
Netflix’s increases from January to March more than doubled the 1.8 million customers added at the same time last year, and were nearly three times higher than analysts expected. The Los Gatos, California-based corporation finished March with almost 270 million global customers, including approximately 83 million in its largest market, the United States and Canada.
Netflix’s stock price has more than doubled since the end of 2022, as investors increasingly see it as the clear winner in a tough streaming battle with Apple, Amazon, Walt Disney Co., and Warner Bros. Discovery.
But Netflix stunned investors by announcing in a shareholder letter that it will no longer provide quarterly updates on member totals beginning next year, making it more difficult to watch the video streaming service’s growth — or shrinkage. Since going public 22 years ago, the corporation has consistently reported quarterly subscriber totals.
Netflix’s shares fell more than 5% in extended trading despite a great financial performance.
In a video chat with analysts, Netflix co-CEO Greg Peters stated that management believes the company’s financial growth has become more important to monitor than quarterly variations in subscriber numbers.
Netflix Now Has Nearly 270 Million Subscribers After Another Strong Showing To Begin 2024
“We think this is a better approach that reflects the evolution of the business,” Peters went on to say.
The corporation still plans to provide annual updates on total subscribers. Raj Venkatesan, a business administration professor at the University of Virginia who researches the video streaming market, claims that Netflix is attempting to persuade investors to pay attention to long-term trends rather than three-month increments, which are susceptible to short-term factors like programming changes and household budgetary pressures that result in sporadic cancellations.
Now that Netflix has been tightening down on password sharing for more than a year, management is likely to understand it has gained the majority of the subscriber gains from those measures and that maintaining that pace would be more challenging, according to eMarketer analyst Ross Benes.
“They are quitting while they are ahead by no longer reporting quarterly subscriber numbers,” Benes told me.
Netflix’s increased subscriber growth has coincided with a tighter focus on increasing profit and revenue, which has pushed management to be more frugal in its spending on original programming and to regularly raise subscription fees.
It’s a strategy that helped Netflix earn $2.33 billion, or $5.28 per share, in the most recent quarter, up 79% from the same period previous year. Revenue increased 15% from a year ago to $9.37 billion. FactSet polled analysts, who predicted earnings of $4.52 per share on $9.27 billion in revenue.
Netflix Now Has Nearly 270 Million Subscribers After Another Strong Showing To Begin 2024
Advertising revenues continue to play a minor role in Netflix’s profitability, with BMO Capital Markets analyst Brian Pitz predicting the firm will earn approximately $1.5 billion from advertising streaming on its service this year, with years of steady growth ahead. According to Pitz, the low-cost advertising option is having a significant influence on attracting and retaining users, with 41 million people expected to pay for the commercial format.
SOURCE – (AP)
