In a letter to shareholders, the streaming giant said “paid sharing” is coming to the US in Q2 after a rollout in New Zealand, Canada, Portugal, & Spain.
Netflix stock is largely flat in after-hours trading Tuesday following a mixed first-quarter earnings report in which earnings per share exceeded analyst expectations and revenue missed expectations.
The streaming giant’s earnings per share was $2.88 against the $2.86 expected, while revenues of $8.16 billion fell just shy of the expected $8.18 billion. But Netflix’s big announcement was the company’s password-sharing crackdown coming shortly to the United States market after months of testing internationally. In a letter to shareholders, Netflix said what it’s calling “paid sharing” is coming to the US in Q2 after a rollout in New Zealand, Canada, Portugal, and Spain.
The company estimates that 100 million users, or 43% of its global user base, share accounts. And while there’s an initial wave of cancellations in countries that introduces paid sharing, Canada— which Netflix views as a reliable US predictor— grew its paid membership numbers in Q4 despite introducing the new model with “extra member” accounts.
“Longer term, paid sharing will ensure a bigger revenue base from which we can grow as we improve our service,” the shareholder letter said.
Subscriber growth missed expectations in Q1, gaining 1.75 million with 2.2 million expected. But Netflix said it was pleased with the current trajectory of its advertiser economics, with a “Basic with Ads” plan coming at $6.99 per month. Ad video quality will improve from 720p to 1080p this month in 12 ad markets, including Canada and Spain.
Lastly, Netflix announced that it’s finally winding down its DVD sales, led by its DVD.com site. Its final DVDs will ship on Sept. 29.
“DVD paved the way for streaming, ensuring that so much of what we started will continue long into the future,” the shareholder letter said. “We feel so privileged to have been able to share movie nights with our DVD members for so long, so proud of what our employees have achieved and excited to continue pleasing entertainment fans for many more decades to come. Thanks to all our employees over the years that worked so hard to build the booster rocket that got streaming to a leading position.”
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