Netflix (NFLX) Q1 2023 Earnings Report

netflix It reported mixed financial results on Tuesday and said it was delaying a full-scale anti-password-sharing rollout.

Netflix originally wanted the release to happen at the end of the first quarter, but on Tuesday it announced that it would do so in the second quarter.

“While this means that expected growth in membership and revenue will decrease in the third quarter rather than the second, we believe this will translate into better results for our members and our business,” he said. This was announced by the company in its earnings statement.

The company said it has seen growth in subscribers in international markets where it has implemented such initiatives.

Here are the results Netflix released Tuesday compared to estimates from analysts polled by Refinitiv:

• Earnings per share: Estimated $2.86 vs. $2.88
• Input: $8.16 billion versus an estimate of $8.18 billion

In the quarter ended March 31, Netflix reported earnings of $1.31 billion, or $2.88 per share, compared with $1.6 billion, or $3.53 per share, a year earlier. Revenue rose to $8.16 billion from $7.87 billion a year ago.

Shares of Netflix initially fell more than 10%, but mostly rose in after-hours trading.

Netflix’s fight against password sharing has been a priority for investors. Late last year, the company said it would begin implementing measures to allow people who borrowed from other accounts to set up their own accounts.

The company says more than 100 million households share their accounts, or 43% of its global user base. This has affected its ability to invest in new content, Netflix said. An ad-supported option and an anti-password sharing feature are aimed at increasing revenue.

“The second quarter launch will be broad-based, including the United States and many countries from a revenue perspective,” co-CEO Greg Peters said on the earnings call. Tuesday. Peters compared the transition from paid sharing to price gouging – subscribers first opt ​​out and cancel, then slowly return and sign up for their accounts.

In February, Netflix introduced password-sharing tips in four countries: New Zealand, Canada, Portugal and Spain. The company requires users in these countries to set up a “primary location” for their accounts and allows users to create two “secondary accounts” for those who don’t live at home for a fee. add on.

Netflix said Tuesday it was pleased with its efforts to reduce password sharing. In Latin America, the company said it has seen a decline following news that could hurt near-term growth. But, Netflix added, those who borrow the password will later activate their accounts and add existing members as “additional member” accounts. As a result, the company says, it will record more revenue.

Canada, a model for the United States, has seen its membership base grow thanks to the launch of pay-sharing, while revenue growth has accelerated and is “growing faster than the United States.”

As the company rolls out paid-sharing initiatives, Nielsen said it expects near-term engagement, as measured by the level of ad support, to “may decline slightly.” However, the company believes that it will pick up again in the same way as in international regions.

Netflix said it believes paid sharing will provide increased revenue as it seeks to improve its service in the future. On Tuesday, Netflix said it plans to spend about $17 billion on content in 2024.

CEO Ted Sarandos said Tuesday that the company hopes to avoid a writer’s strike and that talks with the Writers Guild of America are ongoing.

“We respect the writers and the WGA and we wouldn’t be here without them. We don’t want a strike,” Sarandos said on Tuesday. However, Sarandos noted that Netflix has upcoming TV shows and movies if a strike happens.

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

On Tuesday, Netflix said goodbye to what got it started — a DVD shipping business that ships discs to customers in red envelopes. The company’s CEO, Ted Sarandos, said in a blog post that this will end the DVD business, which continues to “give momentum.”

A year ago, Netflix reported its first subscriber loss in a decade, sending its stock along with its media peers into a downward spiral. The results prompted Netflix and its streaming rivals to focus on profits rather than subscriber numbers.

As Netflix sought to increase its revenue and subscriber base, it banned the ad-supported plan as well as password sharing.

Last November, Netflix unveiled its low-cost tier with ads for $6.99 a month. The ad-supported tier came shortly after losing subscribers as streaming competition intensified.

Sarandos recently revealed that the company will offer multiple levels of ad support in the future.

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

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

On Tuesday, Peters added that Netflix was not ready to announce or speculate on its ad-supported plan.

In some markets, Netflix has seen users switch between tiers after the introduction of pay-sharing, Peters said, although this is very “country specific”.

Executives also addressed the issue that prevented millions of people from watching the live broadcast of Love Is Blind on Sunday.

Both Peters and Sarandos said the company was “sorry to have hurt so many people.”

Peters said Netflix technically has the infrastructure in place to deliver live streaming, such as a Chris Rock comedy special in March. But when Chris Rock tried to improve his special version, it was “introduced incorrectly.” “We hate it when things like this happen, but we learn from it,” Peters said.