By Michael Liedtke
Netflix gained another 9.3 million subscribers to start the year while its profit soared with the help of a still-emerging expansion into advertising, but caught investors off guard with a change that will make it more difficult to track the video streaming service's future growth.
The performance announced Thursday (4/18) demonstrated that Netflix is still building on its momentum of last year, when a crackdown on free-loading viewers relying on shared passwords and the rollout of a low-priced option including commercials revived its growth following a post-pandemic lull.
The strategy resulted in Netflix adding 30 million subscribers last year — the second largest annual increase the service's history.
Netflix's gains during the January-March period more than quadrupled the 1.8 million subscribers that the video streaming service added at the same time last year, and was nearly three times more than analysts had projected. The Los Gatos, California, company ended March with nearly 270 million worldwide subscribers, including about 83 million in its biggest market covering the U.S. and Canada.
Investors increasingly are viewing Netflix as the clear-cut winner in a fierce streaming battle that includes Apple, Amazon, Walt Disney Co. and Warner Bros. Discovery — a conclusion has caused its stock price to more than double since the end of 2022.
But Netflix surprised investors by disclosing in a shareholder letter that it will stop providing quarterly updates about its subscriber totals beginning next year, a move that will make it more difficult to track the video streaming service's growth — or contraction. The company has regularly posted its quarterly subscriber totals since going public 22 years ago.
Netflix's shares dipped more than 5% in extended trading, despite the strong financial showing.
In a video meeting with analysts, Netflix co-CEO Greg Peters said management believes the company's financial growth has become more meaningful to watch than quarter-to-quarter fluctuations in subscribers.
"We think this is a better approach that reflects the evolution of the business," Peters said.
The company still intends to give annual updates on total subscribers. That plan indicates Netflix is trying to get investors focus on long-term trends rather than three-month increments that can be affected by short-term factors such as programming changes and household budgetary pressures that cause temporary cancellations, said Raj Venkatesan, a business administration professor at the University of Virginia who studies the video streaming market.
Now that Netflix has been cracking down on password sharing for more than a year, management also likely realizes it has reaped most of the subscriber gains from those measures and recognizes it will be more difficult to maintain that momentum, eMarketer analyst Ross Benes said.
"They are quitting while they are ahead by no longer reporting quarterly subscriber numbers," Benes said.
Netflix's renewed subscriber growth has been coupled with a sharper focus on boosting profit and revenue — an emphasis that has led management to be more judicious about its spending on original programming and regularly raising its subscription prices.
It's a formula that helped Netflix earn $2.33 billion, or $5.28 per share, in the most recent quarter, a 79% increase from the same time last year. Revenue rose 15% from a year ago to $9.37 billion. Analysts polled by FactSet had projected earnings of $4.52 per share on revenue of $9.27 billion.
Advertising sales still play a small role in Netflix's finances, with BMO Capital Markets analyst Brian Pitz projecting the company will bring in about $1.5 billion from commercials streamed on its service this year, while foreseeing years of steady growth ahead. The low-priced option with ads is having a big impact on bringing in and retaining subscribers, according to Pitz, who expects 41 million customers paying for the commercial format.
Michael Liedtke is an AP technology writer
Harvey Weinstein hit with new sex crime charge in New York
Harvey Weinstein pleaded not guilty Wednesday to a new sex crime charge in New York, as he awaits retrial in his landmark #MeToo case.
Details of the new allegations were not immediately available. He was charged with committing a criminal sex act.
The jailed ex-movie mogul has long maintained that any sexual activity was consensual.
Prosecutors revealed last week that Weinstein had been indicted on additional sex crime charges that weren't part of the case that led to his now-overturned 2020 conviction. But the new indictment was sealed until his arraignment.
Prosecutors have said that the grand jury heard evidence of up to three alleged assaults — two in hotels in the Tribeca neighborhood and one at a lower Manhattan residential building. The purported incidents took place from the mid-2000s to 2016, prosecutors said.
But it's not clear whether any of those allegations underlie the new indictment.
While bracing for the new charges, Weinstein also is awaiting retrial after New York state's highest court this spring overturned his 2020 conviction on rape and sexual assault charges involving two women. The high court, called the Court of Appeals, ordered a new trial, which is tentatively scheduled to begin Nov. 12.
The Court of Appeals ruled that the then-trial judge unfairly allowed testimony against him based on allegations that were not part of the case. That judge's term expired in 2022, and he is no longer on the bench.
Prosecutors have said they'll seek to fold the new charges into the retrial, but Weinstein's lawyers say it should be a separate case.
Weinstein, who also was convicted in 2022 in a Los Angeles rape case, remains behind bars while awaiting his New York retrial.
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