NETFLIX'S PASSWORD-SHARING CRACKDOWN DRIVES Q1 SUBSCRIBER GROWTH; ADDS 9.3 MILLION PAID MEMBERS

Netflix's efforts to crackdown on password sharing continues to bear fruit as the streaming giant posted its strongest start to a year since the beginning of the pandemic in 2020.

Netflix added 9.33 million subscribers in the first quarter of 2024, more than a five-fold increase from 1.75 million additions in the same quarter of the previous year. The growth was driven by a significant rise in the subscriber base in the United States and Canada market.

The video streaming platform's overall subscriber base rose to 269.6 million in the January-March period, up from 260.3 million in the previous quarter and 232.5 million in last year. Revenue grew 14.8 percent year-on-year to $9.37 billion, while the operating income rose 53.6 percent to $2.63 billion. Net income increased by 78.7 percent to $2.3 billion.

The Asia Pacific region, which includes India, added 2.16 million subscribers, taking the subscriber base to 47.5 million. The region had added 1.46 million subscribers in the year-ago period for a total base of 39.5 million.

The region's revenue grew to $1.02 billion, up 9.5 percent from the previous year.

Netflix said it plans to stop reporting quarterly paid membership additions and average revenue per member from Q1 2025. This is because the service now has multiple pricing tiers across various markets due to which each incremental paid membership has a different business impact, it said in a letter to shareholders.

"We're focused on revenue and operating margin as our primary financial metrics — and engagement (i.e. time spent) as our best proxy for customer satisfaction" the letter said.

Read: Netflix bets on cricket, documentaries to attract users in India amid rising competition

It is a better approach since it reflects the evolution of the business, and, is consistent with how the company manages internally for engagement, revenue and profit, Netflix co-CEO Greg Peters said during an earnings call. on April 18. "We will however periodically update when we grow and we hit certain major milestones" he said.

The other co-CEO, Ted Sarandos, said the company started providing more information on engagement through its Top 10 weekly lists and its biannual engagement report that covers about 99 percent of viewing on Netflix. "We're going to look into building on that both in granularity" he said.

Netflix began taking steps to limit password sharing in 2023. In May 2023, the video streaming service expanded paid sharing to more than 100 countries, which account for over 80 percent of its revenue.

Paid sharing requires users to pay an extra fee to continue sharing their Netflix account with people they don’t live with.

However, in markets such as India and Indonesia, the company took a different strategy by not rolling out the paid sharing option.

Netflix said it recently cut prices in many of these markets and believes the penetration is still relatively low, giving the company "plenty of runway without creating additional complexity". Members who were borrowing Netflix accounts could transfer their existing profiles to new and existing accounts.

Read: Drama of sport: Why Netflix is spending $5 billion to buy WWE programming rights

Strong content lineup

Netflix also had a strong slate of content in the March quarter, which likely contributed to its paid membership growth. This includes dramas such as 3 Body Problem, Griselda, live action series Avatar: The Last Airbender, reality show Love Is Blind, limited thriller series Fool Me Once and action comedy series The Gentlemen.

"With more than two people per household on average, we have an audience of over half a billion people. No entertainment company has ever programmed at this scale and with this ambition before," the streaming service said in the shareholder letter.

"We have built a hard to replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix" the letter added.

Netflix is also seeking to scale up its advertising and attract more users to its ad-supported tiers to make it a more meaningful contributor to the business in 2025 and beyond.

The service said its ads membership grew 65 percent on a quarterly basis, as compared to 70 percent in the past two quarters. Netflix didn't disclose any specific numbers for the current quarter but had reported 23 million monthly active users for the ad-supported offering in the previous quarter.

Netflix offers ad-supported service in 12 markets and over 40 percent of these signups came from the ad-supported plans, it said in the letter.

2024-04-19T02:53:04Z dg43tfdfdgfd