Net ix shrugs o sector’s struggle

Netflix has announced another three months of “blockbuster” growth in subscribers, says Dan Gallagher in The Wall Street Journal. It gained 9.3 million in the first quarter of 2024, nearly double the figure expected. This means that more than 31 million subscribers have joined up in the three quarters since it announced that it was cracking down on passwordsharing, a sign that the move “still has legs”. However, quarterly revenue growth barely exceeded Wall Street’s forecast, while Netflix will “no longer report subscribers’ data at all” starting from next year. These factors seem to have thrown a “wet blanket” over the shares.

It’s no surprise that Netflix’s decision to stop reporting data on subscribers has “spooked” the market, says AJ Bell’s Russ Mould. Investors have judged the group on its success with subscriptions ever since it floated. Netflix’s warnings that net subscriber additions may be lower in the next quarter will only fuel concerns that Netflix “has reached maturity in many regions”, with some wondering whether the “easy wins” from ending password-sharing “might have now been achieved”. Yet Netflix “always seems to have new revenuegenerating ideas up its sleeve”, including merchandising and “scooping up advertising dollars from carrying third-party promotions”, while the release slated for the second half of the year “looks solid”.

Netflix’s overall position is strong compared with the “horror show” that is the rest of the streaming industry, says Jennifer Saba for Breakingviews. Netflix turns $16 of every $100 of sales it makes into free cash flow; at Disney the figure is only $9. This has created an “expanding cash pile”, which allows it to spend $5bn to secure the rights to air WWE wrestling for a decade at a time when its rivals are “slashing production budgets and licensing movies to reach profitability”. Netflix is also moving into the “promising area” of video games: it has “rolled out dozens of them already”.