Netflix reports mixed earnings for Q1; delays password crackdown

Netflix, the popular streaming service, surpassed Wall Street's earnings estimates for the first quarter of 2023 but offered a lower-than-expected forecast on Tuesday, indicating the challenges that the mature streaming service faces in its growth pursuit. The plan to curb unauthorised password sharing has been postponed by the company until the second quarter to implement certain improvements, which will cause a delay in certain financial benefits. However, the company said it was pleased with the results so far.

As competition in the streaming industry intensifies, Netflix is looking for new ways to make money, such as the password crackdown and a new ad-supported service. Netflix's earnings per share hit $2.88, with revenue of $8.162 billion.

Co-Chief Executive Ted Sarandos said in the company's post-earnings video interview, "We are growing and we are profitable. We have a clear path to accelerate growth in both revenue and profit, and we're executing it." However, shares of Netflix dropped as much as 11 per cent in after-hours trade following the report, but they later recovered to gain 1.4 per cent.

In the face of increasing competition, Netflix's growth has slowed, with only 1.75 million streaming subscribers added from January to March, missing analyst estimates. In February, the company began rolling out its solution for password-sharing, a "paid sharing" option, in 12 countries. However, the company has delayed expansion, believing it will result in a better outcome for its members and business.

For the April through June period, Netflix forecasted $8.242 billion in revenue and $2.86 in diluted EPS, falling short of Wall Street's projection of $8.476 billion for revenue and $3.05 for diluted EPS. In addition, Netflix announced its move into live streaming, following a mishap with the dating show "Love is Blind" reunion special that was meant to be shown live but was unavailable due to a "bug."

Netflix had a subscriber decline of 200,000 a year ago, its first in over a decade, which reset Wall Street's expectations for the sector. In 2022, the company gained nearly 9 million subscribers, with much of the growth coming from Asia. Netflix's business model has undergone changes due to the impact of its gains in Asia and Latin America on the average revenue per user.

Netflix hopes Hollywood studios can avoid a strike by reaching a "fair and equitable" deal with writers. However, if US-based production is disrupted, the company has access to programming from around the world that it can offer.

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