Netflix Profits Soar As Subscribers Grow

Everyone thought it was the end for the streaming giant once Netflix began cracking down on password sharing. Users of the platform have grown accustomed to leaching off of friends or passing on their account information to their family; however, now the conglomerate is making each individual account holder pay $6.99 to $22.99 a month to use the platform. Well, it looks like consumers gave in.

The Result

Millions of new subscribers as Netflix, still the dominant player in the streaming world, added 9 million subscribers in the past three months, hitting a new record high of 269.9 million subscribers. The company also reported $9.37 billion in revenue and earnings per share of $5.28 for the first quarter.

These are big numbers.

While the current subscriber additions topped Wall Street estimates, the company is still reeling from market reactions to its blowout fourth-quarter report when Netflix only added 13 million subscribers for the entire quarter. 

This led the company to announce its plans to stop sharing quarterly subscriber numbers in 2025. By doing so, the company is covering its bases in case a major decline in subscriber growth were to happen again, as it absolutely decimated its stock the last time it happened.

The company is innovating its revenue model and adding new features, such as advertising. Many of these features have different impacts on KPIs and metrics investors often hold dear when evaluating the company. In order to avoid having major impacts and swings every quarter with the release of growth metrics, the company has decided to keep them on an annual basis. This prevents volatility in its stock price and valuation while also allowing the company to “quit while it's ahead” and keep its position as the subscriber champion among its rivals. 

The company is likely predicting that the growth in subscribers will likely eventually recede as they continue to ebb closer and closer to market saturation. The boost from paid subscribers will likely fade in the next couple of quarters as users switch to personal accounts. 

Netflix's Reinvention

Not long ago, investors remembered the brand struggling to keep up with its rising competitors. Well, this is not the case anymore. 

The company’s first-quarter letter to shareholders displayed several goals that the brand was looking to reach, one of them being to “sustain healthy growth long term” and “improve the variety and quality of entertainment.” 

What did Netflix mean by this?

Simply speaking, the platform wants to introduce more great TV shows and movies, plus a stronger slate of games and must-watch live programming. In recent months, Netflix has expanded into live sports entertainment. In February, the platform aired its first-ever live awards show and followed that up with a 10-year deal to air “WWE Raw” live. That deal was valued at more than $5 billion.

In terms of gaming, Netflix has gotten more creative. The company partnered with Rockstar Games, the producer of “Grand Theft Auto.” This wildly popular video game franchise is set to release its 6th game, touted to be one of the biggest video game releases of all time. 

However, not all has been peachy for Netflix, as last month’s Oscars was a big disappointment. Though the streaming service continues to lead its rivals in terms of nominations, the platform only took home one award for best live-action short film. Going forward, it looks as if the company is moving away from the core of its business, spending mountains of money to develop the world’s best big-budget films and TV shows to win these awards. 

While this has worked in the past, a change in strategy is needed. After the explosion in popularity of its show “Suits,” the company has decided to enact a new plan of licensing its content to other studios. New generations of users are discovering iconic shows from the '90s and early 2000s, such as “Seinfeld” and “Sex and the City” after the show was featured on the Netflix Platform. 

This allows Netflix to license older content that the platform isn’t planning to continue with to rivals for large payouts, adding another source of revenue for the company. 

New Subscriber Tier

Netflix’s new cheaper subscriber tier has found great adoption and success. The ad tier, which costs just $6.99 per month in the United States, is less than Netflix’s other subscription plans and has seen explosive growth. The major difference between this model and its existing, more expensive tier is the introduction of ads. Advertisements are another way for the company to make money, as the platform is sought after by companies for its immense reach. These ads allow the company to offset its costs and provide the tier at a discounted price to its users. 

Currently, the Netflix ad tier has more than 23 million users, growing roughly 65% quarter-over-quarter.