Netflix has reported a significant surge in profits for the first three months of this year, largely attributed to its crackdown on password sharing.
The streaming giant announced that it added 9.3 million subscribers in the first quarter, bringing its total subscriber count close to 270 million.
The company also stated that its net income for the first quarter soared to over $2.3 billion.
However, the company will cease reporting its key subscriber numbers starting next year.
Announcing the decision, the company said in a letter to shareholders: “In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential.”
The company added that currently, the subscriber count has become “just one component of our growth,” urging investors to focus on its profits and revenue.
The company’s revenue for the first quarter increased nearly 15% year-over-year to $9.37 billion.
The company also credited the success to “waves” of hits, such as the crime drama ‘Griselda’.
Some investors view the unexpected decision by the company to stop reporting subscriber numbers as a sign that Netflix’s subscriber growth wave may be ending.
Simon Gallagher, former director at Netflix and now head of entertainment investment at SPG Global, told BBC’s Today program that while the figures show “very, very strong performance,” it may not last long.
“There’s a wind of password sharing crackdown; we saw it last quarter, it continued into this quarter, and it will continue for another quarter or two, but there’s hope that it will end by this time next year.”
Former Netflix employees said the company wants people to “stop focusing on the subscriber count.”
However, the decision to stop sharing subscriber numbers has left analysts in the US dissatisfied.
Jamie Lumley of research firm Third Bridge wrote that the decision raises “questions about Netflix’s subscriber growth prospects.”
Other tech giants like Meta, the parent company of Facebook, and social media platform X, formerly Twitter, have also stopped reporting monthly active user counts when growth slowed down.
Netflix’s success made Adam Sandler the highest-paid actor Netflix’s stock has risen more than 30% since the beginning of this year, nearing its peak in 2021. However, they fell nearly 5% after the announcement.
“Reporting is a very unstable market, and maintaining the dollar per subscriber is a big challenge,” said Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown stock trading platform.
“One of Netflix’s advantages is their original content, known as a very effective retention tool compared to shows and movies that are rehashed.”
Netflix last raised the price of their popular “standard” plan in 2022.
The move was followed by an unusual decline in subscribers that surprised investors and raised concerns that Netflix was losing its dominance over the industry it pioneered.
Shortly after, the company said it would restart growth with password sharing crackdowns and launch a new, cheaper plan with ads.
The company also expanded into areas like sports and video gaming, while continuing to license content from rival media companies looking to boost profits.X,X,X,X,X,X
Analysts say the company also benefits from its global footprint, which helps maintain a relatively strong pipeline of new shows, despite the strike that rocked Hollywood last year.
