Netflix has postponed its long-awaited crackdown on password sharing, and will permanently shut down the DVD mail service that originally defined the company when it launched some 25 years ago.
The streaming giant shared developments on Tuesday, reporting an increase in subscriber growth for the first quarter that beat analysts’ expectations, but revenue fell just short of Wall Street expectations.
Netflix said it added 1.75 million new subscribers for the quarter ending in March, nearly 550,000 more than consensus estimates from FactSet, and in stark contrast to the 200,000 subscriber loss the company suffered in the same period last year.
An unexpected drop in subscribers last year prompted the company to launch its crackdown on password sharing and introduce a new lower-priced tier with ads, moves it hopes will convince exploiters to get their own accounts.
The password sharing ban was initially slated to roll out worldwide 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 normal quarter for us,” Netflix co-CEO Ted Sarandos said during a video call discussing the latest financial results.
Netflix will permanently shut down the DVD mail service that originally defined the company when it launched some 25 years ago
Netflix has tested several approaches to the password sharing problem internationally, and is expected to offer subscribers the option to create sub-accounts for additional users outside their household for a small added fee.
The company also announced that it was shutting down the DVD-by-mail service that the company originally launched a quarter of a century ago.
Netflix co-founder Mark Randolph described in his autobiography how he approached co-founder Reed Hastings with the idea of challenging Blockbuster Video with mail-order VHS tapes, but it would have cost too much.
Instead, they settled on a more cost-effective proposition: selling and renting DVDs online. Blockbuster filed for bankruptcy in 2010.
Netflix ended March with 232.5 million subscribers worldwide to its video streaming service, but it stopped disclosing how many people were still paying for DVD-by-mail delivery years ago, as that part of its business steadily shrank.
When Netflix tried in 2011 to split its DVD rental business from online streaming into a separate service called Qwikster, it prompted an outcry from consumers. The plan was eventually cancelled.
The Postal Service has been steadily diminishing over the past decade and brought in just $145.7 million in revenue last year.
The DVD service, which still delivers movies and TV shows in the red and white envelopes once used as a symbol for Netflix, plans to mail its finished discs on September 29.
Netflix co-founder Reed Hastings sits in a cart full of DVDs ready to ship in 2002. Netflix originally offered DVDs by mail, before pivoting to streaming
Netflix closed March with 232.5 million subscribers worldwide for the video streaming service. Pictured is a scene from Season 4 of You, which premiered in February
After initially falling as low as 11 percent, shares of Netflix rebounded quickly and traded almost flat in extended trading on Tuesday after the results came in.
Netflix reported earnings of $1.3 billion, or $2.88 per share, in the first quarter, down 18 percent from the same time last year, but slightly above analyst expectations, according to FactSet.
Revenue rose 4 percent from a year ago to $8.16 billion, which was lower than analyst estimates.
After initially tumbling as low as 11 percent, shares of Netflix rebounded quickly and traded almost flat in extended trading on Tuesday after the results came out.
“This was pretty much a normal 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 in which he was running the company with Greg Peters, who was promoted to co-CEO in January when co-founder Reed Hastings ended his long reign at the company. Leadership.
“The company is ahead of where it was this time last year, but it still faces obvious pressure from all the players in this crowded space,” said Thirdbridge analyst Jamie Lumley.
Netflix is now looking to cash in on the estimated 100 million viewers who used to freely use other subscribers’ passwords to watch Netflix TV series like The Crown and movies like All Quiet On The Western Front.
