By Justin Anderson
Netflix shares are down in early trading on Friday. And that was after the streaming giant reported it added more than 9.3 million new paid subscribers in the first quarter of 2024 – an increase year-over-year of 16% – to hit 269.6 million globally.
The latest strong earnings report comes as Netflix has seen early success with rolling out both its ad-supported membership tier as well as its crackdown on password-sharing, both of which have yielded positive financial results and, in the case of the ad-backed tier, plenty of new subscribers.
“Our two priorities in ads are to scale our member base and to build out our capabilities for advertisers. We made progress on both fronts in Q1,” the company wrote in its shareholder letter. “Our ads membership grew 65% quarter on quarter (after rising nearly 70% sequentially in each of Q3 23 and Q4 ’23), with over 40% of all signups in our ads markets coming from our ads plan.”
As part of a strong quarterly earnings report that beat analysts’ expectations in several areas, the company also announced that beginning with its Q1 2025 earnings report, it will no longer provide quarterly membership numbers and average revenue per user information. However, the company added in a letter to shareholders that it will “continue to provide a breakout of revenue by region each quarter” and will also “announce major subscriber milestones as we cross them.”
Speaking on a call with investors on Thursday afternoon, Netflix co-CEO Ted Sarandos explained the reasoning behind the shift in strategy from releasing subscriber data to broader, bi-annual reports on viewer engagement, while also insisting the company is “leading the industry on viewing transparency and granularity.”
“Why we focus on engagement is because we believe it’s the single best indicator of member satisfaction with our offering, and it is a leading indicator for retention and acquisition over time,” Sarandos said. “Happy members watch more, they stick around longer, they tell friends, which all grows engagement, revenue and profit, our north stars. We believe that those are the measurements of success in streaming.”
This isn’t the streamer’s first significant adjustment of its reporting metrics. In its quarterly report for the third quarter of 2021, it announced it would shift how it reported viewership, changing the focus from the number of accounts viewing a specific title to hours viewed. With its Q3 report for 2022, it posted its last forecast of subscriber numbers, as part of a shift in emphasis towards revenue rather than subs.
This time around, Netflix reported Q1 revenue of US$9.37 billion, up 15% from the prior-year quarter and beating Wall Street predictions, while operating income rose to $2.63 billion. Earnings per share also topped expectations, coming in at $5.28.
This story originally appeared on Realscreen.
