Netflix showed that its password-sharing crackdown continues to bear fruit, delivering its strongest first-quarter customer additions since the pandemic and further strengthening its position as the dominant global streamer.
The company added 9.33 million subscribers in the first quarter, more than five times the number of customers it added during the same period a year earlier, with its efforts to limit password sharing continuing to bear fruit. Netflix began limiting password sharing in earnest about a year ago.
Netflix has spent the last year rolling out that initiative, working to expand its ad business and changing its line-up of prices and plans to better position itself for the future.
The company plans to stop providing investors quarterly membership numbers and the average revenue generated per member early next year because it now has multiple pricing tiers in a variety of markets. Netflix said it would add annual revenue guidance.
Netflix ended the first quarter with 269.6 million paying customers globally and said it now has an audience of more than a half billion people.
It delivered a stream of hit original TV shows early in the year, including science fiction epic “3 Body Problem,” the latest season of reality series “Love is Blind,” and TV drama “Griselda,” as well as films like “Damsel” and lighter fare including “Irish Wish”.
The streamer’s continued growth comes as competitors like Disney and Paramount push to make their streaming services profitable. While some traditional entertainment companies grapple with password-sharing crackdowns and improving their recommendation engines, Netflix is already benefiting from such product features.
“We have built a hard to replicate combination of a strong slate, superior recommendations, broad reach and intense fandom,” the company said in a letter to shareholders. Netflix said it must continue to improve the variety and quality of its programming as well as its product features and marketing.
Netflix’s subscriber growth in the first three months of 2024 was slower than the fourth quarter of last year, when it added 13.1 million subscribers, but remained robust, topping some Wall Street analyst forecasts. It expects net customer additions during the second quarter to be lower than the first quarter due to seasonality.
The company reported first-quarter revenue of $9.37 billion, up almost 15% from $8.16 billion a year earlier and ahead of its own projections for the period. Net profit rose nearly 80% to $2.33 billion in the quarter, beating the company’s forecast of nearly $2 billion.
Despite the strong first-quarter results, shares of Netflix fell 4.6% in after-hours trading. The company gave a softer-than-expected revenue outlook for the current quarter, and the stock had risen more than 25% this year ahead of the earnings report.
Netflix offers subscribers an increasingly diverse slate, from comfort watches featuring familiar shows and films to flashy new releases that make it a go-to entertainment option for households globally. Netflix originals continue to appeal to subscribers, while the streamer’s rivals are now willing to license more hit shows and movies like “Gossip Girl” and “Young Sheldon” from their libraries.
Co-CEO Ted Sarandos said the floodgates had opened more in terms of Netflix’s ability to license content from rivals but that the company is “very focused on the ones that we think will drive the business.” Sarandos said Netflix is being disciplined in the projects it pursues; the company has said it expects to spend about $17 billion on content this year.
In February, Netflix said it had hired producer Dan Lin, a former executive at Warner Bros. who most recently founded Rideback, to replace the streamer’s longtime top film executive Scott Stuber.
“There’s no appetite to make fewer films, but there is an unlimited appetite to make better films, always,” Sarandos said.
Netflix continues to push further into live events, livestreaming the annual Screen Actors Guild Awards this year and “The Netflix Slam,” its first live tennis match featuring champions Rafael Nadal and Carlos Alcaraz. Earlier this year, Netflix announced a $5 billion, multiyear deal with WWE.
The company last month said it would livestream a boxing match between Mike Tyson and influencer-turned-boxer Jake Paul in July.
Co-CEO Greg Peters said on a call with analysts that Netflix would continue to increase prices as the company adds to the value it offers customers.
More than a year after Netflix began selling its $6.99-a-month ad-supported tier of service, executives said they are still working to boost its advertising business.
“There is plenty of work for us ahead on ads,” Peters said.