Netflix announced that it will no longer report quarterly membership numbers and average revenue per membership starting in the first quarter of 2025. This is a significant change for the company and the streaming industry, as it marks a shift away from focusing solely on customer growth. Instead, Netflix wants investors to judge the company based on metrics such as revenue, operating margin, free cash flow, and time spent on the platform. The decision to stop reporting specific subscriber numbers may be a sign that the second wave of subscriber growth for Netflix could be coming to an end, as the company recently announced a crackdown on password sharing and introduced a lower-cost advertising tier.
The company added 9.3 million subscribers in the first quarter, but anticipates that growth will slow in the second quarter due to seasonality and the fact that many former password sharing customers are now paying subscribers. Netflix’s ARM, which is a key metric the company uses to measure its performance, only rose by 1% year over year in the first quarter. This led to a 4% drop in Netflix’s share price in after-hours trading, as investors were disappointed with the weaker-than-expected revenue growth outlook for the full year. While investors typically prefer transparency, Netflix’s decision to focus on revenue and profit rather than user growth is a sign of the company’s growing maturity and evolution within the industry.
Netflix’s financials are in a strong position, with revenue climbing 15% year over year and operating income increasing by 54%. The company’s operating margin also rose by 7 percentage points to 28%. This puts Netflix ahead of many legacy media companies like Warner Bros. Discovery, Disney, Paramount Global, and Comcast’s NBCUniversal, which have struggled with money-losing streaming services and declining traditional TV businesses. Netflix’s decision to focus on profit, revenue, and free cash flow rather than subscriber numbers reflects the company’s confidence in its financial stability and ability to generate sustainable growth.
The move to stop reporting specific subscriber numbers may prompt other media companies to reevaluate their own reporting practices. While legacy media companies have not yet implemented password sharing crackdowns like Netflix, they may face pressure from investors to deliver comparable growth metrics. Netflix’s decision to evolve beyond traditional subscriber-focused reporting demonstrates the company’s forward-looking approach and willingness to adapt to changing market conditions. Co-CEO Greg Peters emphasized that Netflix is continuously evolving and that historical metrics may no longer accurately reflect the company’s current business state, signaling a shift in how the industry measures success and growth.
Overall, Netflix’s decision to shift focus away from reporting subscriber numbers highlights the company’s shift towards prioritizing profit, revenue, and free cash flow as key indicators of success. The streaming giant’s solid financial performance and strategic decision-making demonstrate its leadership in the industry and set a precedent for other media companies to potentially follow suit. As the streaming wars continue to evolve, emphasizing financial health and sustainability over subscriber growth may become increasingly important for companies looking to thrive in an increasingly competitive market.
