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  • Netflix delayed the full rollout of its crackdown on password sharing, originally planned for Q1.
  • The streaming giant’s earnings beat Wall Street estimates while revenue came in slightly below.

Netflix Co-CEO Greg Peters addresses the future of entertainment during a keynote address at Mobile World Congress 2023.

Joan Cros | Nurphoto | Getty Images

Netflix announced mixed financial results on Tuesday and said it would delay the full rollout of its program Action against the disclosure of passwords.

Netflix originally wanted the rollout to happen by the end of Q1, but said on Tuesday it would do so in Q2.

“While this means some of the anticipated membership growth and revenue benefits will decline in Q3 rather than Q2, we believe this will result in an improved outcome for both our members and our business,” the company said in its result statement.

The company said it has seen an impact on its subscriber growth in international markets where it has already launched such initiatives. Still, Netflix managed to add 1.75 million subscribers, which is roughly in line with StreetAccount’s estimates.

Here are the results Netflix reported on Tuesday, compared to estimates by analysts polled by Refinitiv:

  • Earnings per share: $2.88 versus $2.86 expected
  • Revenue: $8.16 billion vs $8.18 billion expected

For the quarter ended March 31, Netflix reported earnings of $1.31 billion, or $2.88 per share, compared to $1.6 billion, or $3.53 per share, a year earlier . Revenue increased to $8.16 billion from $7.87 billion in the same period last year.

Netflix’s shares initially fell more than 10%, but mostly recovered in after-hours trading.

Netflix’s crackdown on password sharing has given investors top priority. The company announced at the end of last year it would begin Implementing measures to encourage people who have borrowed from other accounts to create their own accounts.

According to the company, more than 100 million households share accounts, which is about 43% of its global user base. That has hampered its ability to invest in new content, Netflix said. Both the ad-supported option and the crackdown on password sharing should increase profits.

“The second-quarter rollout will be broad-based and will include the U.S. and most of our countries when we look at it from a revenue perspective,” said co-CEO Greg Peters in Tuesday’s earnings call. Peters likened the transition to paid sharing to the transition to rising prices—subscribers initially balk and cancel, then slowly come back and sign up for their own accounts.

Netflix in February Outlined guide to sharing passwords in four countries: New Zealand, Canada, Portugal and Spain. The company said it will require users in those countries to set a “primary location” for their accounts and will allow users to set up up to two “sub-accounts” for those not residing in their home location for additional fees.

Netflix announced on Tuesday that it was satisfied with its push to curb password sharing. In Latin America, the company said there were cancellations after the news was announced, hurting near-term growth. However, Netflix added that these password borrowers would later activate their own accounts and add existing members as “additional members” accounts. The company said the result was increased sales.

Canada, which is likely to serve as a model for the US, has seen its membership base surge due to the introduction of paid sharing, and revenue growth has accelerated and is “growing faster than the US.”

The company said that as it rolls out its paid sharing initiatives, it expects short-term engagement – which is measured by Nielsen for its ad-supported tier – to “likely to decline slightly.” Nevertheless, the company assumes that it will get back on its feet in an international comparison.

Netflix said it believes paid sharing will generate more revenue in the future as the company looks to improve its service. On Tuesday, Netflix said it expects to spend about $17 billion on content in 2024.

Co-CEO Ted Sarandos said Tuesday the company wants to avoid that a writers strike and discussions with the Writers Guild of America continue.

“We respect the authors and the WGA and couldn’t be here without them. We don’t want a strike,” Sarandos said on Tuesday. Still, Sarandos pointed out that in the event of a strike, Netflix has an extensive slate of TV shows and movies ahead of it.

Netflix noted Tuesday that “competition remains intense as we compete with so many forms of entertainment.”

On Tuesday, Netflix said goodbye to what it started with: its mail-order DVD business, where it mailed discs to customers in red envelopes. The company’s CEO, Ted Sarandos, said in a blog post that its DVD business, which “continues to shrink,” will be shut down for good.

Netflix reported about it a year ago the first loss of subscribers in a decade, sending his shares and those of his media peers into a downward spiral. The results urged Netflix and its streaming rivals to concentrate on profits via subscriber numbers.

When Netflix wanted to increase its profits and subscriber base, it focused on an ad-supported plan and crackdown on password sharing.

Last November, Netflix revealed It is the cheaper tier with commercials that costs $6.99 per month. The ad-supported tier came shortly after losing subscribers as streaming competition increased.

Sarandos said recently The company will likely offer multiple ad-supported tiers in the future.

Netflix’s ad-supported plan now features an average of 95% of the same content as its ad-free plans due to recent licensing deals, the company said on Tuesday.

“We are pleased with the current performance and trajectory of our advertising economics per member,” Netflix said on Tuesday.

Peters added Tuesday that Netflix isn’t ready to announce or predict expectations regarding its ad-supported plan.

In some markets, Netflix has experienced user rotation between tiers after the introduction of paid sharing, Peters said, although this is very “country-specific.”

Executives also addressed the glitch that left millions unable to watch Sunday’s live broadcast of “Love is Blind.”

Peters and Sarandos both said the company is “really sorry for disappointing so many people”.

Peters added that from a technical standpoint, Netflix has the infrastructure to host a live broadcast, as was the case with the Chris Rock Comedy special back in March. But that “an error was introduced” when trying to improve the Chris Rock special. “We hate when things like this happen, but we will learn from it,” said Peters.

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