Netflix: Revenue Surges Following ban on Password sharing

Netflix has reported a significant increase in profits during the first quarter of this year, which can be attributed in part to efforts to address password sharing.

In the first quarter, the streaming giant reported an impressive increase of 9.3 million customers, pushing its total number of subscribers to nearly 270 million.

The company also announced a significant increase in its first quarter profits, which exceeded $2.3 billion (£1.85 billion).

However, starting next year, the company will no longer provide updates on important subscriber figures.

Sharing the decision, the company expressed in a letter to shareholders: “During our initial stages, when our revenue and profit were limited, the increase in membership was a promising sign of our future possibilities”.

The company emphasised that subscriber numbers are now just one aspect of its growth, urging investors to shift their attention to its profits and revenue.

The company’s revenue for the first quarter increased by almost 15% compared to the previous year, reaching $9.37bn.

The company also acknowledged a series of successful releases, including the crime drama Griselda.

Several investors interpreted Netflix’s surprising move to halt the disclosure of subscriber numbers as a potential indication that the company’s rapid customer expansion could be slowing down.

Simon Gallagher, a former Netflix director and now principal of entertainment investment firm SPG Global, shared his insights on the current performance during an interview with the BBC’s Today programme. He cautioned that despite the impressive numbers, there may be uncertainty ahead.

“There has been a noticeable positive impact from the crackdown on password sharing. This trend was observed in the previous quarter and has carried over into the current quarter. It is expected to persist for another quarter or two, with the anticipation that it will conclude by this time next year.”

The former executive from Netflix expressed the company’s desire for individuals to shift their focus away from obsessing over the number of subscribers.

However, analysts in the US have expressed their concern over the decision to halt the sharing of subscriber numbers.

Jamie Lumley, an analyst at research firm Third Bridge, expressed concerns about the future growth of Netflix’s subscriber base following the decision.

Additionally, other major players in the tech industry, like Meta (formerly known as Facebook) and X (formerly Twitter), have chosen to no longer disclose their monthly active user figures due to a decline in growth.

Netflix’s stock has experienced a significant increase of over 30% since the beginning of the year, approaching its highest point in 2021. Nevertheless, they experienced a nearly 5% decline following the announcement.

“Streaming can be a challenging market to navigate, and retaining customer loyalty is no easy task,” commented Sophie Lund-Yates, the lead equity analyst at share dealing platform Hargreaves Lansdown.

“Netflix’s original content slate is widely recognised as a powerful tool for keeping subscribers engaged, setting it apart from shows and films that are simply repurposed.”

Netflix recently increased the cost of its widely-used “standard” plan in 2022.

The move was accompanied by a surprising decline in subscribers, which caught investors off guard and raised concerns about Netflix’s position in the industry it had once led.

Shortly after, the company announced its plans to boost growth by addressing password sharing and introducing a more affordable plan that includes advertisements.

The company is also expanding into new areas like sports and video games, while also partnering with other media companies to increase their profits.

Experts noted that the company’s worldwide presence played a crucial role in its ability to consistently produce new shows, even during the turbulent strikes that affected Hollywood in the previous year.