Netflix Delays Password-Sharing Fees, Cancels DVD Rentals

Netflix followed its triumphant Q4 with mixed results for Q1, the first quarter under new co-CEOs Ted Sarandos and Greg Peters. The period ending March 31 produced profit of $1.31 billion, down 18 percent year over year. Revenue was up 3.6 percent to $8.16 billion from $7.87 billion in Q1 2022. Paid sharing was launched in four countries in Q1, but the company delayed the broader rollout that was to come with a global crackdown on password piggy-backers, which was originally scheduled for Q1. The wider initiative, which includes the U.S., is now set for Q2. In addition, Netflix announced it would shutter its DVD rent-by-mail program.

“While this means that some of the expected membership growth and revenue benefit will fall in Q3 rather than Q2, we believe this will result in a better outcome for both our members and our business,” the company said in an earnings press release.

Netflix “said it saw its subscriber growth impacted in the international markets where it has already rolled out such initiatives. Still, Netflix added 1.75 million subscribers, roughly in line with StreetAccount estimates,” reports CNBC.

Looking ahead, the company says the move to convert Netflix freeloaders to a source of revenue — by forcing those who share passwords from outside a household to get their own account, or letting account owners pay a little extra to share — could substantially increase cash flow.

“More than 100 million people watch Netflix using borrowed accounts,” according to The Wall Street Journal. “This is an important transition for us, so we’re working hard to make sure we do it well and as thoughtfully as we can,” Peters said on Tuesday’s earnings call.

Peters described the move as “very much like a price increase,” with an “initial cancel reaction” and the streamer then working to convert the quitters back. “In Canada, which the company said is a good proxy for the U.S., Netflix said its paid membership base is now larger than it was before it rolled out the paid-sharing changes,” WSJ writes.

Netflix’s ad-supported tier, meanwhile, has not drained subscribers from the company’s ad-free plan, per WSJ, adding that the “average revenue per member it makes from its ad-backed plan is higher than that of its standard $15.49-a-month ad-free plan.”

Netflix says the lower-priced package is now at about “95 percent content parity globally.” The ad-supported plan, which is $6.99 per month in the U.S., will by the end of this month include 1080p video and the ability to simultaneously stream on two devices in the 12 markets where it is offered, making it “a much better value,” suggests The Verge.

And on September 29, the company that made red envelopes famous will pull the plug on its vestigial DVD rent-by-mail program, 25 years and “5.2 billion discs later,” writes The New York Times.

Redbox Owner Interested in Buying Netflix’s DVD Business, The Hollywood Reporter, 4/19/23

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