Why is Netflix Ditching Subscriber Reports? Strategic Shift Sparks Investor Concerns
Netflix (NFLX.O) has announced its decision to discontinue reporting subscriber numbers every quarter, signaling a potential slowdown in its long-standing dominance amid the streaming wars.
Following this announcement, Netflix’s shares experienced a decline in after-hours trading, falling by 4.2% to $585.41. Despite attracting a significant number of new customers in the first quarter, Netflix’s revenue forecast failed to meet analyst expectations.
The streaming giant reported a robust addition of 9.3 million new customers, nearly double the consensus forecast by analysts, bringing its global total to 269.6 million subscribers by the end of March. However, Netflix executives are now emphasizing revenue and operating margins over customer additions as key performance indicators.
Co-Chief Executive Greg Peters highlighted the rationale behind this strategic shift, citing a desire to focus on metrics deemed most critical to the business. Consequently, Netflix plans to cease reporting subscriber additions quarterly from the first quarter of 2025 onwards, reserving announcements for major milestones.
Industry analysts anticipate that this decision may unsettle investors and complicate Wall Street’s ability to forecast Netflix’s performance accurately. Moreover, questions linger about future subscriber growth once Netflix exhausts its potential from recent initiatives, such as cracking down on password sharing.
Magalie Grossheim, a senior equity research analyst at M Science, noted the uncertainty surrounding Netflix’s future catalysts for member additions beyond the current phase of paid sharing benefits.
Similar trends have emerged among other tech giants, with companies like Meta (META.O) and X (formerly Twitter) refraining from disclosing traditional metrics like monthly active users amid decelerating growth.
Paolo Pescatore, an analyst at PP Foresight, expressed skepticism regarding Netflix’s decision to withhold subscription data, particularly in light of the company’s recent strong growth trajectory.
Netflix’s shares have soared by 89% over the past year, outpacing competitors like Walt Disney (DIS.N), which continues to incur losses in its streaming business.
In a shareholder letter, Netflix outlined strategies to fuel future growth, emphasizing enhancements to content variety, quality, and the expansion of its advertising business. The company is preparing for its second annual advertiser presentation in New York, where it aims to showcase upcoming titles and engage with potential advertising partners.
Co-CEO Ted Sarandos highlighted an exciting lineup of upcoming content, including new seasons of popular series like “Bridgerton” and “Sweet Tooth,” alongside unscripted events such as a roast of retired NFL quarterback Tom Brady.
Netflix’s foray into ad-supported plans, introduced in November 2022, has gained significant traction, accounting for 40% of all sign-ups in markets where the option is available. This move has provided a cost-effective alternative for users impacted by Netflix’s password-sharing crackdown.
The company reported earnings per share of $5.28 for January through March, surpassing analyst expectations, with revenue climbing 14.8% to nearly $9.4 billion. Operating income also saw a robust year-over-year increase of 54%, reaching $2.6 billion. Looking ahead, Netflix projected revenue of $9.49 billion for the current quarter, slightly below analyst estimates.
To cater to its diverse global audience, Netflix continues to diversify its content offerings, including a $5 billion deal to stream WWE’s “Raw” starting in January 2025. Co-CEO Sarandos dispelled recent rumors about reducing film production, emphasizing the company’s commitment to delivering high-quality content to its subscribers.
In essence, Netflix’s strategic shift in reporting reflects a maturing streaming market, where the focus is transitioning from user acquisition to revenue optimization and content innovation.
As reported by Reuters in their recent article
