Netflix Shifts Investor Focus On Profit and Revenue by Ending Subscriber Number Reporting

Netflix announced on Thursday that it won’t be telling investors about its membership numbers or how much money each member brings in anymore. This change starts in early 2025.

This is a big deal because, for a long time, companies like Netflix have been competing for more customers. But now, Netflix wants investors to look at different things to judge how well it’s doing. They want to focus on things like how much money they’re making, how efficiently they’re running, how much extra cash they have, and how long people spend watching Netflix.

This change might also mean that Netflix isn’t growing as fast as before. In the first quarter, they got 9.3 million new subscribers, which is great.

However, they think the growth might slow down in the next quarter because of “seasonality,” meaning people might not sign up as much during certain times of the year. Also, more people who used to share passwords for free are now paying, so there might be fewer new customers.

Netflix shares
Shares of Netflix (Credits: Google Finance)

A way to measure how well Netflix is doing financially is something called ARM, which stands for Average Revenue per Membership. It only went up by 1% compared to last year.

After Netflix shared all this news, their stock went down by 4% in trading after the regular hours. One reason might be that they’re not expecting to make as much money this year as some people thought. They’re predicting a 16% growth in the second quarter, but only 13% to 15% for the whole year.

Investors usually prefer more transparency, so, interestingly, Netflix is giving less detailed information about its memberships, something it used to be proud of.

They used to even break down numbers by region, which was more detailed than what other companies did. Companies like Apple and Amazon have never shared this kind of information about their streaming services quarterly.

Netflix evolves, experiments with ads, and special features, diversifying revenue streams. (Credits: Diamante Uranga)

But this change also shows that Netflix is growing as a company. For over ten years, it’s been seen as a big disruptor in the media world. Now, after about five years of intense competition in what people call “the streaming wars,” Netflix is the top dog.

“In the beginning, when we didn’t make much money, getting more members showed how much potential we had,” Netflix said in a letter to its shareholders, as per CNBC report “But now, we’re making a lot of money and have extra cash. We’re also trying out new things like ads and special features for members, so getting more members isn’t the only way we’re growing.”

They also said that as they’ve changed their pricing plans and added different options in different countries, each new paying member affects their business differently.

Netflix Subscribers
Other media companies may follow Netflix’s lead, and rethink reporting subscriber numbers. (Credits: Netflix)

Netflix can focus on making money because it’s in a better financial position than most other media companies. For example, its revenue went up by 15% compared to last year.

Its operating income (which is how much money it makes after paying for its regular expenses) went up by 54%, and its operating margin (which is how much of its revenue is profit) went up by 7 percentage points to 28%.

These increases are much bigger than what other companies like Warner Bros. Discovery, Disney, Paramount Global, and Comcast’s NBCUniversal have seen. Those companies have streaming services that either don’t make much money or lose money, and their traditional TV businesses are shrinking.

This makes people wonder if other media companies will also stop telling investors how many subscribers they have for their streaming services. Many of these companies haven’t started cracking down on people sharing passwords like Netflix has. This might mean they still have a lot of room to grow, which investors would probably like to know about.

“We’re changing and we’ll keep changing,” said Netflix co-CEO Greg Peters during a call about the company’s earnings, noted CNBC. “It means that the way we used to figure things out in the past isn’t as accurate anymore.”

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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