Netflix hits 270m users, profits surge, after password-sharing crackdown

Phil Rosenthal, host of the Netflix series Somebody Feed Phil. Photo / Netflix

Netflix gained another 9.3 million subscribers to start the year while its still-emerging expansion into advertising helped produce financial results that exceeded analysts’ estimates.

The performance announced Thursday demonstrated that Netflix is still building on its momentum of last year, when a crackdown on free-loading viewers relying on shared passwords and the rollout of a low-priced option including commercials revived its growth following a post-pandemic lull.

The strategy resulted in Netflix adding 30 million subscribers last year — the second-largest annual increase the service’s history.

Netflix’s gains during the January-March period more than quadrupled the 1.8 million subscribers that the video streaming service added at the same time last year, and was nearly three times more than analysts had projected. The Los Gatos, California, company ended March with nearly 270 million worldwide subscribers, including about 83 million in its biggest market covering the US and Canada.

Investors increasingly are viewing Netflix as the clear-cut winner in a fierce streaming battle that includes Apple, Amazon, Walt Disney Co. and Warner Bros. Discovery.

But Netflix surprised investors by disclosing in a shareholder letter that it will stop providing quarterly updates about its subscriber totals beginning next year, a move that will make it more difficult to track the video streaming service’s growth — or contraction. The company has regularly posted its quarterly subscriber totals since going public 22 years ago.

Netflix’s shares dipped more than 3 per cent in extended trading, despite the strong financial showing.

The renewed subscriber growth has been coupled with a sharper focus on boosting profit and revenue — an emphasis that has led management to be more judicious about its spending on original programming and regularly raising its subscription prices.

It’s a formula that helped Netflix earn US$2.33 billion, or US$5.28 per share, in the most recent quarter, a 79 per cent increase from the same time last year.

Revenue rose 15 per cent from a year ago to US$9.37 billion. Analysts polled by FactSet had projected earnings of US$4.52 per share on revenue of US$9.27 billion.

In an investor presentation, Netflix said it had an 8.1 per cent share of TV viewing in the US. The figure, sourced from Nielsen, excluded mobiles and other devices.

Advertising sales still play a small role in Netflix’s finances, with BMO Capital Markets analyst Brian Pitz projecting the company will bring in about US$1.5 billion from commercials streamed on its service this year, while foreseeing years of steady growth ahead.

The low-priced option with ads is having a big impact on bringing in and retaining subscribers, according to Pitz, who expects 41 million customers paying for the commercial format.

Netflix Standard With Ads has made it as far as Australia, where it costs A$6.99 ($7.50) per month. The firm has yet to name a date for an NZ launch for its cheapest plan.

The firm has joined Disney+, Sky TV’s Neon and Amazon’s Prime Video in hiking prices well beyond inflation this year.

Netflix increased the price of its cheapest NZ plan by 15 per cent in March (see table above).

With reporting by Herald staff.