Netflix Adds 1.75 Million Global Q1 Subs, Rolling Out Paid Subscription Password Sharing in the U.S. This Quarter

Netflix April 18 reported net subscriber growth of 1.75 million subs in the first quarter (ended March 31), to end the period with more than 232 million subs worldwide. The tally is a positive compared with the previous-year period when the streamer unexpectedly lost 200,000 subs, ending the quarter with more than 221 million subs worldwide.

Specifically, Netflix added 100,000 subs in North America, 640,000 subs across Europe, the Middle East and Africa, and 1.46 million subs in Asia. The streamer lost 450,000 subs in Latin America.

After launching paid sharing in four countries in South America, Netflix said it plans a broader rollout, including in the United States, in the current quarter. The option enables subscribers to share their passwords with non-subs for a reduced fee.

Quarterly revenue topped $8.16 billion, with net income around $1.3 billion, down from net income of $1.59 billion and revenue of $7.8 billion in the prior-year period.

“This was a business-as-usual quarter for us,” co-CEO Ted Sarandos said on the webcast.

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Apple Reports Record Quarterly Services Revenue, Which Includes Apple TV+ Subscriptions

Apple Feb. 2 reported record first-quarter (ended Dec. 31, 2022) services revenue of $20.76 billion, which was up 6.4% from revenue of $19.51 billion in the previous-year period.

Services includes sales of movies and TV shows on iTunes and revenue from the App Store, Mac App Store, Apple Music, Apple Pay, Apple TV+, Apple Arcade and Apple News+ subscription revenue, among others.

Services and iPad revenue (up 29% to $9.4 billion) were the lone highlights in the report as Apple reported an 8% drop in iPhone revenue to $65.8 billion from $71.6 billion during the previous-year period. Mac revenue dropped almost 29% to $7.75 billion from $10.8 billion, and wearables (which includes the Apple Watch) revenue dipped almost 8% to $13.48 billion, from $14.7 billion last year.

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In a statement, CEO Tim Cook said he remained upbeat on reaching the milestone of 2 billion active Apple devices worldwide achieved in a “challenging economic environment.”

“We are proud to have our best lineup of products and services ever, and as always, we remain focused on the long term and are leading with our values in everything we do,” Cook said.

Best Buy Q1 Entertainment Sales Fall 13.6% Due to Tough Pandemic Comps

Best Buy May 24 reported first-quarter (ended April 30) entertainment revenue of $593.6 million, with same-store sales dropping 13.6%.

That compares with an uptick of more than 32% on revenue of $687 million during the previous-year period when consumers spent large on home entertainment due to COVID-19 shutdowns of alternative entertainment choices.

The segment includes products such as DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software.

International entertainment same-store revenue dropped 7.5% to $60.2 million from $65 million, which was up 12.2% from the previous-year period in 2020.

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Best Buy CEO Corie Barry

CEO Corie Barry said the sales declines across all retail categories underscore the outsized results during the pandemic when consumers upped their purchases in part due to government-imposed stay-at-home living.

“Even with the expected slowdown this year, we continue to be in a fundamentally stronger position than we were before the pandemic from both a revenue and operating income rate perspective,” Barry said in a statement. “We are confident in the strength of our business and excited about what lies ahead.”

On an earnings call, Barry said, “On one hand, consumers still have relatively strong balance sheets. They continue to spend, wages are up, and unemployment is at record lows. On the other hand, many consumers are lapping stimulus income they received last year and are also facing issues like higher gas and food prices, rising interest and mortgage rates, recession fears, stock market volatility, and geopolitical uncertainty, stemming from the war in Ukraine.

“Underlying all that is the gradual shifting of spend from stay-at-home purchases to more experiential spend on services and the activities many were unable to enjoy during the pandemic…. While the drivers of our results were largely as expected, the comparable sales decline of 8% was on the softer side, as inflationary pressures heightened throughout the quarter. That trend has continued into the beginning of Q2, and it does not appear that it will abate in the near term.”

Accordingly, she said, the company is “revising our guidance and now expect [a] fiscal ’23 comparable sales decline in the range of 3% to 6%. And we are correspondingly updating our non-GAAP operating income rate to a range of 5.2% to 5.4%. We will continue to proactively navigate this rapidly changing environment, balancing the day-to-day operations with our commitment to our long term-strategy and growth initiatives.”

FuboTV Lost Almost 74,000 Streaming Subs in Q1

FuboTV, the sports-themed subscription streaming video service, lost 73,700 subscribers in the ended the first quarter (ended March 31). The streamer ended the period with 1.056 million subs, down from 1.13 million at the end of 2021. The tally was up 81% from a subscriber base of 582,000 during the previous-year period.

Calling the quarter a “challenging macro environment,” CEO David Gandler said the platform achieved strong growth in subscribers and revenue when compared to Q1 2021. Indeed, the company upped its cash reserves to $453 million.

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, concurred, saying the streaming platform remains a strong long-term investment.

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“We think FuboTV is focusing on the right things,” Pachter wrote in a May 5 note. “Subscriber growth is continuing at a rapid pace, the company chose to increase price to better cushion itself against content cost escalation, and marketing spending is trending in the right direction as FuboTV is laser focused on the lifetime value of customers acquired, rather than growing its subscribers at any cost.”

Meanwhile, FuboTV continues to pursue a stake in the growing online sports gambling market. The company recently launched Fubo Sportsbook, an app that affords sports viewers the option to meld a sports wagering platform with live TV.

“Wagering remains an important pillar in our path to profitability and strategy to integrate interactivity into our live TV streaming experience,” Edgar Bronfman Jr., executive chairman of FuboTV, said in a statement. “While striving to be the most compelling destination for cord cutters, fuboTV has started to enact a series of approaches to increase monetization, accelerate our ad sales business and further strengthen our unit economics.”

Roku Posts $23.5 Million First-Quarter Fiscal Loss, Adds 1.1 Million Active Accounts

Fueled by consumer trends that show more people using streaming devices than legacy pay-TV devices in the U.S., Roku April 28 reported a gain of 1.1 million active user accounts to 61.3 million for the first quarter (ended March 31). That’s up 14% from 53.6 million active accounts in the previous-year period. However, Roku gained 2.4 million active accounts in the prior-year period.

Roku attributed the slowdown in active user growth in part to an end to government stimulus checks issued to consumers during the pandemic.

Total streaming hours increased 14% to 20.9 billion, up 14% from 18.3 billion hours in the previous-year period. Streaming device revenue declined 19% to $86.9 million, from $107.7 million a year earlier.

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Overall, the company reported a net loss of $23.5 million on revenue of $733.7 million, which compared with net income of $75.8 on revenue of $574.2 million last year.

Roku’s ad-supported branded “The Roku Channel” remains a top five channel on the Roku platform in the U.S. by reach and engagement.

“We have delivered solid performance in a challenging operating environment and expect that we will continue to navigate through macro headwinds, including inflationary pressures, geopolitical conflict, and supply-chain disruptions,” Roku said in the shareholder letter.

Warner Bros. Discovery Touts 24 Million Discovery+ Streaming Subscribers; 100 Million With HBO, HBO Max

Warner Bros. Discovery April 26 reported 24 million first-quarter (ended March 31) direct-to-consumer subscribers, which largely includes the Discovery+ streaming service, up 2 million subs since the end of Q4 on Dec. 31, 2021.

When including 76.8 million HBO and HBO Max subscribers, the company now has more than 100 million SVOD subs worldwide.

WBD, which is the new corporate moniker following the April 8 closing of the $43 billion asset combination between WarnerMedia and Discovery Inc., did not include WarnerMedia results in its first-ever quarterly fiscal report.

The Discovery+ streaming platform helped WBD up U.S. distribution revenue 11% to $886 million from $796 million in the prior-year period. Internationally, the SVOD, along with foreign properties and Global Cycling Network, helped up distribution revenue 4% to $536 million, from $514 million in the prior-year period.

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When including advertising revenue, U.S. Networks revenue increased 7% to more than $1.9 billion from $1.8 billion primarily due to higher pricing and the continued monetization of content offerings on the company’s next generation initiatives, partially offset by secular declines in the pay-TV ecosystem and lower overall ratings.

In the company’s first fiscal call, CEO David Zaslav said ongoing internal restructuring would continue to put a focus on monetizing “everything,” not rolling back the theatrical window on Warner Bros. Pictures movies, and not outspending the competition (i.e., Netflix) on content.

“When you open a movie in theaters, it has a whole stream of monetization,” Zaslav said on the call. “More importantly, it’s marketed. It builds a brand so when it does go to a streaming service there’s a view that [the movie] has a higher quality that benefits the streaming service.”

The CEO said, “each and every decision” would be made through “the lens of analyzing asset value,” as the new company looks to cut $3 billion in synergistic cost savings, which includes layoffs.

Indeed, one of the first fiscal casualties was the shuttering of the CNN+ streaming service just weeks after its launch, including investment of more than $300 million. CFO Gunnar Wiedenfels said the decision was “exhibit A” in restructuring, adding that “2022 [would] undoubtedly be a messy year.”

Verizon Loses Q1 Pay-TV Subs, Adds Broadband

Verizon Communications continued the ongoing trend among multichannel video distributors supplanting declining pay-TV subscribers with high-speed internet customers.

The mobile carrier April 22 said it lost 78,000 Fios Video subscribers in the first quarter, ended March 31. That compared with a loss of 85,000 subs in the previous-year period. Verizon ended the period with almost 3.5 million video subs — down 277,000 subs from last year.

Meanwhile, Fios Internet added 55,000 subscribers in the quarter, which was down from a net add of 98,000 broadband subs in the previous-year period. Verizon ended the period with almost 6.6 million high-speed internet subs — up from 6.3 million subs last year.

“Our operational performance in the first quarter further positions Verizon for long-term growth and increases our competitive standing in mobility, nationwide broadband, the value market, and above the network business solutions and applications,” CEO Hans Vestberg said in a statement.

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Analysts Weigh in Following Netflix’s Black Tuesday Financial Report

On the heels of Netflix’s underwhelming first-quarter fiscal results, which included the loss of 200,000 subscribers, Wall Street reacted decisively, shedding $40 billion off the streamer’s market valuation in aftermarket trading April 19.

Netflix shares continued to slide April 20, down more than 35% in midmorning trading. Indeed, more than 80 million shares traded hands before noon — almost 10 times the daily average — as investors looked to cut losses as Netflix said it expects to lose 2 million subs in the current quarter ending June 30.

Among analysts, the consensus suggested a collective “told-you-so” mindset, with experts contending Netflix shares have been overheated for a while. Even co-founder, co-CEO Reed Hastings sending up a trial balloon about a future lower cost ad-supported subscription plan did little to offset the Wall Street bears.

“It is likely that Netflix is ‘dead money’ for at least another quarter,” Michael Pachter, Wedbush Securities media analyst and longtime Netflix bear, wrote in a note.

Pachter said the decline in subscribers coupled with guidance for an even greater decline is likely to keep optimists away until there is some evidence that subscribers will once again grow.

“Should Netflix roll out an ad-supported tier, the stock will likely respond favorably, but we expect management to test the concept for at least several quarters before announcing a major change,” Pachter wrote, adding he would “remain on the sidelines” until there is evidence that Netflix is a “growth company” once more.

Eric John, VP of media center for IAB, said he is surprised Netflix waited so long to consider an ad-supported option — especially considering Disney’s decision to offer the option this year.

“The streaming business is a hit-driven enterprise where consumers expect value every time they open the app, and when the cancel button and the competition is a click away,” John said in a statement. “The cards were on the table when we saw in their Q1 earnings letter: ‘Added competition may be affecting our growth some.'”

J. Christopher Hamilton, assistant professor of television, radio and film at Syracuse University, said the nosedive in Netflix market valuation stocks is not surprising, and that quick action is needed to reverse this course.

“Netflix is no longer the disrupter it used to be because its tactics have been duplicated by its competition (binge viewing, premium programming, data analytics, etc.),” Hamilton said. “The company is still in the lead in terms of subscribers, but it won’t hold that for long if they don’t innovate quickly.”

But innovation in today’s streaming ecosystem includes new challenges such as sports rights, video games and gambling.

Andre Swanston, SVP of media  and entertainment at Transunion, said Netflix in recent months has failed to keep up with evolving consumer demands, which he said include live sports. Competitors Paramount+, Amazon Prime Video, Peacock, HBO Max and ESPN+ are all incorporating growing amounts of live sports.

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“Netflix only has one touchpoint to the consumer,” Swanston said. “Its competitors have a better understanding of the consumer’s lifestyle (ecommerce, live events, sports, etc.,) and how to best engage with them.”

The analyst believes the streamer’s foray into mobile gaming will go nowhere. Swanston says Netflix’s gaming competitors have market advantage, legacy titles, own more publishing studios, and exhibit a clear metaverse strategy.

“It is not yet clear how [Netflix’s gaming] strategy will actually come together,” he wrote. “Just because they have popular shows/movies doesn’t necessarily mean those titles will translate to popular games.”

Netflix Posts 200,000 Q1 Sub Loss, Cites Account Sharing, Among Other Factors

Netflix April 19 said it lost 200,000 net subscribers for the first quarter (ended March 31). The subscription streaming VOD service had projected a net sub growth of 2.5 million. Netflix, which ended the quarter with 221.6 million subscribers, is projecting a net loss of 2 million subs in the current second quarter, ending June 30.

The company cited password sharing, mature markets, increased competition and the Russian boycott, among other factors, for the sub growth slowdown.

“We estimate that Netflix is being shared with over 100 million additional households, including over 30 million in the [U.S./Canada] region,” Netflix wrote in the shareholder letter. “Account sharing as a percentage of our paying membership hasn’t changed much over the years, but it’s harder to grow membership in many markets — an issue that was obscured by our COVID growth.”

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Notably, Netflix posted subscriber losses across all of its regions, except the Asia Pacific, where it added 1 million subs. The service lost 640,000 subs in North America, 300,000 in Europe, Middle East and Africa, and 350,000 in Latin America.

Netflix shares were down nearly 25% ($40 billion) in aftermarket trading.

Analyst: Netflix Price Hikes to Offset Slowing Subscriber Growth

Netflix’s subscription price hike last month, the service’s third since 2019, should insulate the SVOD behemoth against slowing subscriber growth in North America and beyond. So says longtime Netflix bear analyst Michael Pachter with Wedbush Securities in Los Angeles.

Pachter, who has a “neutral” rating on Netflix shares, believes that as sub growth continues to cool, any marginal sub gains will occur in less developed regions worldwide at lower subscription prices.

Michael Pachter

The analyst contends the streamer will add 2.5 million subs worldwide in the first quarter (ended March 31) to up its global membership base past 224 million, in line with company guidance. Pachter said he believes any sub gain was likely offset in part by the elimination of all Netflix users in Russia due to the ongoing war in neighboring Ukraine.

The analyst believes Netflix added 400,000 subs in North America, with revenue in the region boosted by price increases. The service added 750,000 net subs in Europe, Middle East and Africa (EMEA), with price increases in the quarter likely offset by unfavorable currency headwinds. Another 300,000 net sub adds in Latin America, with lower average-revenue-per-user (ARPU) due to currency headwinds. Finally, Pachter says Netlfix added more than 1 million net subs in the Asia Pacific region, driven in part by lowered price in India that likely drove user growth in the quarter.

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“Netflix’s first-mover advantage and large subscriber base provides the company with a nearly insurmountable competitive advantage over its streaming peers,” Pachter wrote in an April 14 note. “Subscription price increases in the west should fuel additional content production and growth in other regions, and our bias is that cash flow will turn positive in 2022 and beyond, as management has guided.”

Netflix reports Q1 fiscal results after the market close on April 19.