The reason Netflix didn’t immediately crack down on password sharing. On Tuesday, Netflix announced that the widespread launch of its paid account-sharing option had been delayed until the second quarter.
Netflix started enforcing stricter password policies in four additional countries earlier this year but ultimately decided against a global rollout because the company “found enough improvement opportunities” from its soft launch.
The postponement may have exacerbated the company’s difficulties in expanding its customer base during the March quarter, as shown in its most recent financial statements.
Up nearly 5% from last year’s period, the company reported a net increase of 1.75 million global streaming subscribers, less than the more than 3 million Wall Street analysts had expected.
Netflix has reported a “cancel reaction in each market when we announce the news” but has since seen “increased acquisition and revenue” due to the paid sharing option. However, Netflix stated that “some of the expected membership growth and revenue benefit will fall in Q3 rather than Q2” due to the delay in the rollout.
After founder Reed Hastings transitioned to executive chairman in January, the company’s new co-CEOs, Greg Peters and Ted Sarandos, will release their first quarterly earnings report on Tuesday.
Due to the company’s rough performance in the previous year, including the loss of 200,000 subscribers in the same period a year ago, which triggered a significant selloff, this quarter was of critical importance. The business has also been focusing on expanding its new subscription service, which advertisements support.
“Engagement on our advertisements tier is above our early estimates and, as expected, we’ve seen very little moving from our basic and premium plans,” the firm wrote in its Tuesday subscriber letter.
Netflix reported revenue of around $8.2 billion for the quarter, up nearly 4% from the same period in the prior year and in line with analysts’ projections. The company’s quarterly income fell 18% to $1.3 billion.
Netflix said it expects revenue to grow by nearly 5% to $8.2 billion during the three months that ended in June but projects quarterly profits to fall by more than 19% from the same period in the prior year.
The report comes days after Netflix bungled what was supposed to be its second-ever live show — the season 4 “Love is Blind” reunion — and had to apologize to frustrated fans and tape the special for streaming. Unlike its streaming rivals, Netflix had long been resistant to live streaming because of its high costs. But, facing steeper competition, Netflix has started experimenting with the format, which it has not yet perfected.
On Tuesday, Netflix said it would officially wind down the DVD rental service that made it a household name this fall.