CNN
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Final 12 months, Netflix made a very dangerous wager by pushing users who share passwords to create their own accounts — however it’s paid off.
Netflix, the dominant player in streaming, added greater than 9 million subscribers within the first three months of the 12 months, hitting a file excessive of 269.6 million subscribers.
“It added extra subscribers than many analysts, myself included, anticipated,” mentioned eMarketer senior analyst Ross Benes. “This indicators that password sharing was much more frequent than beforehand thought as Netflix retains changing freeloader viewers into paid customers.”
Whereas the subscriber additions topped Wall Road’s estimates, the corporate nonetheless reported a drop in progress from its blowout fourth-quarter report, when Netflix added 13 million subscribers. Netflix introduced Thursday that it plans to cease sharing its quarterly subscriber numbers in 2025.
The corporate additionally reported $9.37 billion in income and earnings per share of $5.28 for the primary quarter, beating Wall Road’s estimates, in accordance with FactSet.
Nevertheless, the inventory, which has been a darling of Wall Road this 12 months, fell in after-hours buying and selling.
A lot of the corporate’s previous progress and success, analysts say, has come from its outdated, well-established enterprise mannequin. In latest months, Netflix has made strikes to increase and even radically reinvent its enterprise in an effort to juice revenue.
Whereas streaming rivals like Disney+, Hulu, Max (owned by CNN’s mother or father firm Warner Bros. Discovery) and Peacock work to attract in subscribers with unique programming, Netflix has made large bets recently in stay sports activities, video video games, and in offers to license different suppliers’ content material — all whereas transitioning from an advertising-free subscription service to a full-blown ad-supported juggernaut.
For Netflix, final month’s Oscars have been a disappointment: Although the streaming service led its rivals in nominations, it took house only one award, for greatest live-action quick movie. Going ahead, the corporate appears to be shifting away from what it was recognized for: spending its cash on creating the big-budget movies and TV reveals in a position to win these awards.
The corporate’s first-quarter letter to shareholders laid out a number of objectives to “maintain wholesome progress long run,” together with: “Enhance the range and high quality of our leisure — with extra nice TV reveals and films, a stronger slate of video games and must-watch stay programming.”
In latest months, after “Fits” exploded in recognition on the platform, Netflix has indicated that it plans to license extra content material from different studios. New generations are rediscovering iconic reveals from the 90s and the early aughts, like “Seinfeld” and “Intercourse and the Metropolis” after they present up on Netflix’s platform.
“They’re getting tons of viewership on each unique content material and licensed content material,” Alicia Reese, an fairness analyst who covers Netflix for Wedbush Securities, mentioned. “It’s productive and it’s cheaper for them.”
Netflix has additionally expanded into stay and sports activities programming this 12 months, encroaching on conventional TV’s area. In February, Netflix aired its first-ever awards present, the Display Actors’ Guild Awards, and introduced a 10-year deal to air “WWE Uncooked” stay, valued at greater than $5 billion.
Within the struggle for eyeballs, Netflix has gotten artistic, partnering with Rockstar Video games’ “Grand Theft Auto,” the wildly well-liked action-adventure online game franchise, to additional push into the video game space.
“We’re stoked by the efficiency of GTA,” Netflix co-CEO Greg Peters mentioned in January. “We have been within the high cellular recreation downloads for a number of weeks, which reveals it was not solely large for us, however large numbers for cellular gaming generally.”
Reese has religion in Netflix’s new path.
“Netflix has that successful method proper now,” she mentioned. “They’ve a number of content material of assorted sorts that maintain individuals utilizing the service at varied value factors.”
Reese mentioned she believes Netflix additionally has different avenues of progress together with the corporate’s newer advertising-supported subscription tier.
The advert tier, which costs $6.99 per month in the US, considerably lower than Netflix’s different subscription plans, has seen explosive progress because it was launched in late 2022, in accordance with the corporate. In January, Netflix’s president of promoting, Amy Reinhard, shared that Netflix’s ad-tier had greater than 23 million customers.
Whereas the corporate didn’t share an up to date variety of ad-tier customers, in Thursday’s shareholder letter, Netflix mentioned its adverts membership grew 65% quarter-over-quarter.
Reese mentioned Netflix’s future progress may hinge on its success within the promoting area.
In January, Peters mentioned the corporate aimed to grab extra advert {dollars} from conventional TV rivals.
“We all know advert {dollars} comply with engagement. We’ve acquired essentially the most engaged viewers so we consider we’re effectively positioned to seize a few of that advert spend that shifts from linear to streaming,” he mentioned.
On the corporate’s earnings name, Netflix co-CEO Greg Peters mentioned the corporate’s determination to cease sharing quarterly paid subscriber numbers starting in 2025.
“We’ve developed, and we’re going to proceed to evolve, creating our income mannequin and including issues like promoting and our further member options. Issues that aren’t immediately linked to variety of members,” he mentioned. “So, every incremental member has a special enterprise affect.”
Benes from eMarketer, mentioned Netflix’s determination to cease sharing subscriber numbers permits the corporate to “give up whereas its forward and exit because the world heavyweight champ in subscribers”
“Netflix is emphasizing what advantages them,” Benes mentioned. “The password sharing boosts will ultimately recede and it is going to be very tough to proceed so as to add as many subscribers as they’ve added in the previous few quarters.”