The most effective way to redirect investor attention is to withhold information altogether. Netflix announced on Thursday that it will cease reporting quarterly membership figures and average revenue per membership starting in the first quarter of 2025.
This move marks a significant departure for the company and for the ongoing “streaming wars,” which have largely revolved around acquiring customers. According to Netflix, the company wants investors to evaluate its performance based on metrics that executives consider the “best proxy for customer satisfaction,” as stated in its quarterly shareholder letter. These metrics include revenue, operating margin, free cash flow, and user engagement on the platform.
Additionally, this decision signals that Netflix’s second wave of subscriber growth may be slowing down. Despite adding 9.3 million subscribers in the first quarter, fueled by global password-sharing crackdowns and the introduction of a cheaper advertising tier, the company anticipates slower growth in the second quarter due to seasonal factors. This slowdown may mark the beginning of a more prolonged period of reduced subscriber additions, as many previous non-paying password sharers have transitioned to paying customers.
Netflix’s “average revenue per membership” (ARM), a key financial metric, only increased by 1% year over year in the quarter. Consequently, Netflix shares experienced a 4% decline in after-hours trading, partly attributed to a weaker full-year revenue growth forecast compared to analysts’ expectations.
While investors typically prefer greater transparency, Netflix’s decision to curtail detailed membership information underscores the company’s evolving maturity. Previously known as a disruptive force in the media landscape, Netflix is now a dominant player in the streaming industry, about five years into the “streaming wars.”
According to Netflix, its focus on profitability and revenue reflects its financial stability compared to many traditional media companies. For instance, Netflix reported a 15% year-over-year increase in revenue and a 54% growth in operating income, with operating margin rising to 28%. In contrast, competitors like Warner Bros. Discovery, Disney, Paramount Global, and Comcast’s NBCUniversal are grappling with money-losing or marginally profitable streaming services alongside declining traditional TV businesses.
This shift prompts speculation on whether other media companies will follow suit and cease reporting subscriber numbers for their streaming services. Unlike Netflix, many of these companies have yet to implement aggressive measures like cracking down on password sharing, potentially indicating further growth opportunities that investors may seek clarity on.
During Netflix’s earnings call, co-CEO Greg Peters emphasized the company’s ongoing evolution and the need to reconsider traditional metrics for assessing business performance. This strategic shift underscores Netflix’s transition from a growth-focused disruptor to a financially grounded industry leader.
