Earlier on Friday, global film and television entertainment giant Netflix (Netflix) announced its quarterly report ending the end of March. With an excellent financial report in every way, Netflix's management personally went to battle, causing a major loss for investors.

As of press release, Netflix fell more than 5% before the market on Friday.

It was supposed to be a happy earnings season

By all accounts, Netflix completed a commercially successful quarter. The company achieved revenue of 9.3 billion US dollars and net profit of 2.3 billion US dollars. Earnings per share of 5.28 US dollars surged 60% year over year. These indicators far exceeded market expectations.

What excites the market most is that Netflix welcomed 9.3 million new subscribers in the first quarter, almost double Wall Street's expectations, and reached a record 269.6 million subscribers at the end of the quarter.

There are also multiple factors behind this achievement. First, Netflix continued to launch a number of popular titles that attracted the attention of global users in the first quarter — according to the Q1 report, the criminal biography miniseries “Griselda” received 66.4 million views (note: Netflix's statistics indicate the total viewing time within 91 days divided by the length of the episode), “Three Body Problem”, which went live at the end of March, received 39.7 million views, and “The Last Airbender” received 68.3 million views.

In addition, many works produced by Netflix in the UK, South Korea, and Spain also performed well in viewing data.

At the same time, changes in Netflix's business strategy are also driving more users to switch to paying. Beginning last year, Netflix began taking steps to crack down on “account sharing”. The company estimated that 100 million people were using other Netflix accounts. At the same time, the company introduced a lower fee, but a subscription tier for watching ads was required to encourage more “free” users to start paying.

However, just after the release of the hot financial report, Netflix management announced that it would stop disclosing its total number of subscribers starting in the first quarter of 2025. For investors in the streaming media industry, this is also a core indicator that has determined the company's rise and fall over the past few years.

Why was the adjustment suddenly made

In its performance forecast, Netflix also stated that it will maintain a close revenue growth rate in the second quarter of this year, but the net growth in the number of subscribers will slow down somewhat.

Regarding the cessation of disclosing the number of subscribers, the company explained that in the future, the focus will shift to user engagement, that is, the time subscribers spend on the service. It will also develop new pricing points and revenue streams, including advertising.

In the earnings call, Netflix's co-CEO Greg Peters tried to explain that each incremental membership has a different impact on the business, which means that the simple math problem done in the past — the number of members multiplied by subscription fees — is increasingly unable to accurately reflect the state of the business. Greg also promised investors that the company will “regularly update” the number of subscribers as it reaches “major milestones” in the future.

Regarding this change, PP Foresight analyst Paolo Pescatore said that the company's practice of stopping disclosing the number of subscribers “will not be well received.” Paolo believes that no matter how Netflix tries to shift the focus of the market from the number of subscribers to financial data, the net increase in the number of subscribers is still a key indicator that everyone wants to see.

Ross Benes, senior analyst at eMarketer, also believes that the move to stop posting the number of subscribers will also allow Netflix to take advantage of the situation as the “world champion in the number of subscribers.” Benes said that Netflix is stressing things that are beneficial to them. The growth brought about by cracking down on shared accounts will eventually decline, and it is very difficult for the company to continue adding new users as it has in the past few quarters.

There are various signs that Netflix has also continued to take action in recent months to try to increase profits by expanding and even changing its business model. The company recently began investing heavily in live streaming, sports, and gaming, buying content from other vendors, and completing the transition from ad-free subscription services to more powerful streaming platforms supported by ads.

In February of this year, Netflix livestreamed the American Screen Actors Guild Awards ceremony. This is also the first time the platform has made such an attempt. Also, in January of this year, Netflix and WWE announced that they had obtained the exclusive rights to the live broadcast of “WWE Raw”, with a total ten-year contract value of over 5 billion US dollars.

In the gaming sector, the introduction of Rockstar Games' “Grand Theft Auto Remastered Trilogy” on the Dunaifei platform last year once sparked a buzz in the market. This is a pleasant surprise for this business direction, which has been questioned by investors.

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