Netflix gives update on paid sharing strategy in Q1 results

The streamer says membership and revenue growth has accelerated in Canada since beginning its password-sharing crackdown in the region.

Shares in Netflix were down slightly in after-hours trading after the streaming giant tabled its first-quarter earnings report, which saw the company add 1.75 million new users to hit a total of 232.5 million global paid subscribers, an increase of 4.9% year-over-year.

Overall revenue for Netflix rose to US$8.16 billion in the first quarter, an increase of 3.7% year-over-year and up from $7.85 billion in Q4 of 2022. The company also saw a rebound in diluted earnings per share, which rebounded to $2.88 in Q1 of 2023 after plummeting to just $0.12 in the previous quarter.

In its letter to shareholders, Netflix management provided an update on its much-discussed ad-supported membership tier, and on its its crackdown on password-sharing, which launched in Canada, New Zealand, Spain and Portugal during Q1.

“In Canada, which we believe is a reliable predictor for the U.S., our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the U.S.,” read the letter. It also said engagement with the ad-supported tier has been “above our initial expectations.”

Netflix recently opened its new Canadian headquarters in Toronto, and announced two new projects in Canada: an Arctic-set comedy with CBC and APTN, and a new Mae Martin-led thriller.

Broken down regionally, Netflix saw paid memberships stay relatively flat at 74.4 million in the UCAN market, an increase of about 100,000 subs, while revenues in the region were also somewhat flat in Q1 at US$3.61 billion. In the EMEA region, paid users increased to almost 77.4 million, representing an additional 640,000 new memberships, while revenues rose to almost US$2.52 million from US$2.35 million in Q4.

LATAM was the only region to lose subscribers in the quarter, dropping approximately 450,000 members to sit at 41.2 million, though revenue did tick up to US$1.07 billion. Finally, the APAC market saw the greatest subscriber growth, adding 1.46 million paid users to reach almost 39.5 million as revenue rose to US$934 million.

During the earnings call with investors, co-CEO Ted Sarandos (pictured) weighed in on the potential of a writers strike, and what contingency plans the streamer had in place should members of the WGA walk off the job come May 1.

“We don’t want a strike,” he said. “The last time there was a strike, it was devastating to creators.”

“We really don’t want this to happen, but we had to make plans for the worst and so we do have a pretty robust slate of releases to take us into a long time,” he added. “But just to be clear, we are at the table and we are going to try to get to an equitable solution so there isn’t a strike.”

Also during the call, Sarandos said the streamer was going to maintain consistency with its $17 billion content spend, dependent on revenue growth, while CFO Spence Neumann added: “We said we would stay at roughly $17 billion on average over a few-year period, over that 2022 to 2024 period, but there’s a big entertainment market to go after beyond that. So as we reaccelerate revenue, we see a lot of opportunity to grow into that viewing and engagement and business opportunity ahead.”

A version of this story first appeared in Realscreen

With files from Barry Walsh

Photo by George Pimentel Photography