Netflix profits surge after password-sharing crackdown

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Netflix’s operating income surged 54 per cent in the first quarter as it added 9.3mn subscribers worldwide, proving that its crackdown on password sharing has had more lasting benefits than some investors expected.

The streaming pioneer reported earnings of $5.28 a share, well ahead of Wall Street forecasts of $4.51. Operating income totalled $2.6bn, up from $1.7bn a year ago. Its total subscribers reached 269mn, up 16 per cent from a year earlier.

Netflix said it would stop disclosing its subscriber numbers from next year — a crucial metric for investors in the streaming era. In its letter to shareholders, it said it was shifting its focus to engagement — the amount of time its subscribers spend on the service — and developing new sources of revenue including advertising.

“Memberships are just one component of our growth,” the letter said. Netflix shares fell 2.4 per cent in after-hours trading.

“No matter the company’s attempt to switch focus from subscribers to financials, net [subscriber] adds is the key metric everyone wants to see,” said Paolo Pescatore, an analyst at PP Foresight. “The movement to no longer disclose quarterly subscriptions from next year will not go down well.”

But Pescatore added that the latest results showed there was still room for growth from its password crackdown and push into advertising. Netflix said memberships to its advertising-supported tier rose 65 per cent from the previous quarter.

Its shares have risen 30 per cent this year, significantly outperforming the broader market. Netflix said it generated strong engagement in the first quarter from subscribers in the UK with Fool Me Once, which had 98mn views.

Other standouts included the drama series Griselda with 66.4mn views and 3 Body Problem with about 40mn.

Netflix said it expected revenue to grow between 13-15 per cent for the full year.

Via

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