Netflix has delayed its long-touted crackdown on password sharing, and will permanently shutter the DVD-mail-service that originally defined the company when it launched about 25 years ago.
The streaming giant shared the developments on Tuesday, as it reported a surge in subscriber growth for the first quarter that exceeded analyst expectations, but revenue that was slightly below Wall Street forecasts.
Netflix said it added 1.75 million new subscribers for the quarter that ended in March, nearly 550,000 more than consensus estimates from FactSet, and a stark contrast to the loss of 200,000 subscribers that the company suffered in the same period last year.
Last year’s unexpected drop in subscribers prompted the company to launch its crackdown on password sharing and introduce a new lower-priced tier with advertising, moves it hopes will coax freeloaders to get their own accounts.
The password-sharing ban had initially been slated for worldwide rollout by the end of March, but Netflix said it now expects to complete the transition in the US by the end of June, with new features that will prompt users to get their own accounts.
‘This was pretty much a business-as-usual quarter for us,’ Netflix co-CEO Ted Sarandos said during a video call discussing the latest financial results
Netflix will permanently shutter the DVD-mail-service that originally defined the company when it launched about 25 years ago
Netflix has tested several approaches to the password sharing issue internationally, and is expected to offer subscribers the option to create sub-accounts for additional users outside their households for a small added fee.
The company also announced that it is shutting down the DVD-by-mail service that originally launched the company a quarter century ago.
Netflix co-founder Marc Randolph described in his autobiography how he and co-founder Reed Hastings had flirted with the idea of challenging Blockbuster Video with mail-order VHS cassettes, but it would have cost too much.
They instead landed on a more cost-effective proposition: DVDs sold and rented online. Blockbuster filed for bankruptcy in 2010.
Netflix ended March with 232.5 million worldwide subscribers to its video streaming service, but it stopped disclosing how many people still pay for DVD-by-mail delivery years ago as that part of its business steadily shrank.
When Netflix attempted in 2011 to split its DVD rental business from online streaming into a separate service called Qwikster, it provoked howls of protest from consumers. The plan was ultimately scrapped.
The mail service had been steadily dwindling during the past decade and generated just $145.7 million in revenue last year.
The DVD service, which still delivers films and TV shows in the red-and-white envelopes that once served as Netflix’s emblem, plans to mail its final discs on September 29.
Netflix co-founder Reed Hastings sits in a cart full of ready-to-be-shipped DVDs in 2002. Netflix originally provided DVDs by mail, before pivoting to streaming
Netflix ended March with 232.5 million worldwide subscribers to its video streaming service. Pictured, a scene from the fourth season of You, which premiered in February
After initially tumbling up to 11 percent, Netflix’s shares quickly rebounded and traded roughly flat in Tuesday’s extended trading after the results came out
Netflix reported earnings of $1.3 billion, or $2.88 per share, in the first quarter, an 18 percent decline from the same time last year, but slightly above analysts’ forecast, according to FactSet.
Revenue edged up 4 percent from last year to $8.16 billion, a notch below analyst estimates.
After initially dropping 11 percent, Netflix’s shares quickly rebounded and traded roughly flat in Tuesday’s extended trading after the results came out.
‘This was pretty much a business-as-usual quarter for us,’ Netflix co-CEO Ted Sarandos said during a video call discussing the results.
Although Sarandos has been co-CEO since 2020, the January-March period represented the first quarter he has been running the company with Greg Peters, who was promoted to co-CEO in January when co-founder Reed Hastings ended a long reign at the helm.
‘The company is ahead of where it was this time last year but still clearly facing the pressure from all the players in this crowded space,’ Third Bridge analyst Jamie Lumley said.
Now Netflix is looking to wring revenue from an estimated 100 million viewers who have been freeloading on other people’s subscriber passwords to watch Netflix TV series such as ‘The Crown’ and films such as ‘All Quiet On The Western Front.’
