Netflix said today it will stop reporting quarterly subscriber numbers starting in 2025, a huge change for the giant streamer whose stock tends to get buffeted up or down (mostly up lately) by those numbers. In a letter to shareholders along with first-quarter earnings, the company said it’s now focused on other metrics and that memberships “are just one component of our growth.”
“As we’ve noted in previous letters, we’re focused on revenue and operating margin as our primary financial metrics — and engagement (i.e. time spent) as our best proxy for customer satisfaction. In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential. But now we’re generating very substantial profit and free cash flow (FCF). We are also developing new revenue streams like advertising and our extra member feature, so memberships are just one component of our growth,” the letter said.
“In addition, as we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact. It’s why we stopped providing quarterly paid membership guidance in 2023 and, starting next year with our Q1’25 earnings, we will stop reporting quarterly membership numbers and ARM. We’ll continue to provide a breakout of revenue by region each quarter and the F/X impact to complement our financials. For guidance, we’ll add annual revenue guidance on top of what we already provide today: our annual operating margin and free cash flow forecast and forecasts for quarterly revenue, operating income, net income, and EPS. We’ll also announce major subscriber milestones as we cross them.”
The new approach by Netflix will remove one element of transparency from its reporting, but in some ways it will bring it a bit more in line with some of its rivals. In the nearly five years since the launch of Apple TV+, the tech giant has never reported any subscriber data. Amazon, similarly, does not break out Prime Video subscribers or viewers as a discrete population, given the company’s broad portfolio of customer offerings.
Among the big media companies chasing Netflix, Disney gives the clearest picture of its subscriber progress, breaking out numbers for Disney+, Hulu and ESPN+ each quarter. Since the merger of WarnerMedia and Discovery closed two years ago, the combined entity has issued a combined number for all streaming rather than breaking out Discovery+ or other niche services. Like most players in ad-supported streaming, Warner Bros Discovery also does not break out subscribers by tier.
“The movement to no longer disclose quarterly subscriptions from next year will not go down well; more so given subs growth that the streaming king has seen over the last year,” said analyst Paolo Pescatore.
In fact, the stock is trading down after the numbers today.
One fund manager on CNBC called the move an indication that the company recognizes it won’t likely be able keep up with the sub growth it saw in 2023 and into last quarter, likely driven in large part by a password sharing crackdown. “They are thinking forward to next year and don’t want to be held accountable to that metric.”
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