Netflix hits record 232.5 million subscribers
3 Min Read
The streaming media company says it has delayed a sweeping crackdown on account password sharing "to improve the experience for members."
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The Netflix booth during Europe's leading digital games fair Gamescom, which showcases the latest trends of the computer gaming scene in Cologne, Germany, August 21, 2019 (Reuters)
Netflix said on Tuesday that its subscriber base reached a new high of 232.5 million in the first quarter of the year and that its embryonic ad-supported tier was performing well.
The streaming television company posted a $1.3 billion quarterly profit, in line with predictions, but said it has delayed a sweeping crackdown on account password sharing "to improve the experience for members."
Read more: Netflix considering live streaming
Instead, Netflix stated that it intends to begin offering paid password-sharing alternatives this quarter.
"It's clear that the company wants to manage any fallout from the new strategy," said Jamie Lumley of Third Bridge.
As a result, some membership and income benefits associated with the transfer have been postponed, according to a letter to shareholders from Netflix.
The company has experimented with "borrower" or "shared" accounts in a few areas but plans to launch them in the US and abroad this month, according to co-CEO Greg Peters in a live earnings call.
Netflix stated that it will take time to ensure that members have smooth access to the service while they are away from home or on numerous platforms such as tablets, TVs, or smartphones.
According to Peters, "We learned from this last set of launches about some improvements we can do."
"It was better to take a little bit of extra time to incorporate those learnings and make this transition as smooth as possible for members."
While Netflix's new ad-subsidized membership tier is still in its early stages, engagement has exceeded expectations, with "very little switching from our standard and premium plans," according to the streaming company.
Insider Intelligence predicts that Netflix's new tier will generate $770 million in ad revenue this year, rising to $1 billion the following year.
As Netflix's growth slowed last year, the streaming business concentrated on developing a lower-cost membership tier with advertising.
Netflix also aimed to persuade users who were viewing for free using shared passwords to start subscribing to the service without upsetting current members.
"This account sharing initiative helps us have a larger base of potential paying members and grow Netflix long term," indicated co-CEO Ted Sarandos.
Insider Intelligence suggested that for the first time ever, US consumers will spend more time this year watching digital video on platforms such as Netflix, TikTok, and YouTube than watching traditional television.
The market researcher predicted that, for the first time, "linear TV" will account for fewer than half of daily viewing.
"This milestone is driven by people spending more and more time watching video on their biggest and smallest screens, whether it's an immersive drama on a connected TV or a viral clip on a smartphone," said Insider Intelligence chief analyst Paul Verna in a statement.
According to Insider Intelligence, Netflix and YouTube are "neck and neck" in terms of digital video viewer interest.
Netflix is projected to continue spending around $17 billion per year on series and films, with that figure perhaps rising after next year.
"Netflix subscriber growth shows that the streaming wars are still on," said Lumley.
"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."
