Netflix: Profits rise after crackdown on password sharing

  • By Mariko Oi & Natalie Sherman
  • BBC News

image caption, Sofia Vergara stars as Griselda Blanco in the six-part Netflix series

Netflix says its profits rose in the first three months of the year, thanks in part to a crackdown on password sharing.

The streaming giant added 9.3 million customers in the first quarter, bringing its total number of subscribers to nearly 270 million.

The company also said its profit rose to $2.3bn (£1.85bn) in the first quarter.

But the company will stop reporting key subscriber numbers from 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”.

Today, subscriber numbers have become “a component of our growth,” urging investors to focus on its profitability and revenue.

Its revenue rose nearly 15% year-on-year to $9.37bn in the first quarter.

The company is credited with a “drumbeat” of hits like crime drama Griselta.

Some investors saw its unexpected decision to stop reporting subscriber numbers as a sign that Netflix's wave of customer growth may be coming to an end.

Simon Gallagher, a former Netflix executive and now chief executive of entertainment investment firm SPG Global, told the BBC's Today program that the numbers indicated a “very, very strong performance” but that this would not last.

A former Netflix man said the company “wants people to move away from determining subscriber numbers.”

But the move to stop sharing subscriber numbers has ruffled feathers among analysts in the US.

Jamie Lumley of research firm Third Bridge wrote that the decision raises “questions about the growth prospects of Netflix's subscriber base.”

Other tech giants Facebook parent Meta and social media platform X, formerly Twitter, stopped reporting monthly active user numbers as growth slowed.

Netflix shares are up more than 30% since the start of the year, nearing their 2021 peak. However, they were almost 5% lower after the announcement.

“Streaming is a very niche market and keeping customer dollars is an uphill climb,” said Sophie Lund-Yates, lead equity analyst at equity trading platform Hargreaves Lansdown.

“Netflix has an edge, its original content slate, which is known to be a better retention tool compared to reruns of shows and movies.”

Netflix last raised the price of its popular “Standard” plan in 2022.

The move was followed by an extraordinary drop in subscribers, which stunned investors and intensified concerns that Netflix was losing its dominance in the industry it once pioneered.

Soon, the company said it will resume development by cracking down on password sharing and introducing a new program that will be less expensive but show ads.

The company is also pushing into areas such as sports and video games, while licensing rival media companies is looking for ways to boost profits.

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