(Los Angeles) Netflix started the year with no big surprises with 232.5 million subscribers and $8.16 billion in revenue for the first quarter.
The streaming veteran, who has set out to diversify its revenue streams, further announced on Tuesday that it will discontinue its historic DVD rental service by mail launched 25 years ago by the end of the year.
“Our goal has always been to provide the best service to our members but it has become very complicated with the decrease in this activity,” the company explained in an earnings release.
Netflix posted net income of $1.3 billion in the first quarter, down 18% year on year, in line with analyst forecasts.
“These fairly lukewarm results do not prove that the company is going to be able to revitalize its business with advertising and paid password sharing,” reacted Paul Verna, analyst at Insider Intelligence.
After the pandemic euphoria for digital platforms, Netflix has had a very difficult 2022, pushing company executives to focus more on diversifying revenue streams than growing users.
In November, they launched a new cheaper subscription, with advertising.
The platform also wants to force users to pay to add profiles to their account, instead of sharing their password for free.
This new method is being rolled out but has taken a bit of a delay.
“This means that the expected growth in terms of users and revenue will come in the third quarter rather than the second,” the company said.
The American group, which tested this idea in Latin America, had specified in January to expect terminations of subscriptions.
“But as households that were using credentials borrowed from others activate their own accounts and add profiles, we believe our total revenue will increase, which is our goal with these plan changes and price,” Netflix said.
Both initiatives “face obstacles and will take time to deploy on a large scale”, regretted Paul Verna.
Insider Intelligence estimates that Netflix will generate $770 million in advertising revenue in the United States this year, and more than $1 billion in 2024.
The Disney platform also added a new formula with advertising at the end of the year.
But according to the research firm, the competition also plays out, and above all, with other entertainment services.
In March, the firm predicted that in 2024 adult American TikTok users will spend more than 58 minutes a day on average on TikTok, just behind Netflix (62 minutes), and far ahead of YouTube (48.7 minutes).
Analysts also referred to the “second screen” phenomenon: “Viewers are often on TikTok while Netflix is playing in the background. Advertisers considering buying advertising on Netflix should be aware that some viewers may be distracted to the point of dropping their streaming schedule,” they noted.
Spencer Neumann, Netflix’s chief financial officer, said in January he hoped advertising would quickly make up 10% of revenue to start with, and “much more after that.”
