Netflix Inc (NASDAQ:NFLX) introduction of “paid sharing” in several markets and the performance of its newer ad-supported subscription tier are set to be the focus of investor attention when the streaming giant reports its first-quarter earnings after the market close on Tuesday.
The streaming industry has become much more crowded since the group brought TV & Films to household devices in 2007.
The company is brushing shoulders with the likes of Disney, Amazon and Paramount - all of which have launched their own services in recent history.
Last week, Warner Bros' announced the return of Harry Potter in the form of a TV show, an offering for a new streaming service, Max ( a coming together of Discovery+ and HBO Max).
Analysts, on average, expect Netflix to post earnings per share of $2.86 and 3.6% revenue growth to $8.17 billion for the three months ended March 31, 2022.
Netflix itself has forecast profits of $1.27 billion, or $2.82 per share, on revenue of $8.17 billion, a 4% increase year-over-year.
In the same quarter in 2022, the company reported earnings per share of $3.53 on revenue of $7.87 billion.
Investors will be looking out for any mention of revenue related to Netflix’s recently-introduced “paid sharing” option, with Wells Fargo analysts in a March 31 report suggesting that Netflix could net $3 billion from the move.
The new option, which allows users to pay a reduced subscriber fee to share an account, was rolled out in markets where the company has cracked down on password sharing, being Canada, New Zealand, Spain, and Portugal.
Subscriber numbers will also be in focus, with Netflix no longer providing guidance for this measure. It is expected that subscriber growth of about 2.3 million users within the company’s cheaper ad-supported tier will offset the loss of about 1.9 million users in its higher-priced ad-free tier during the quarter.
Netflix shares moved lower ahead of its results, down 2.3% at US$338.20 on Friday afternoon.
CMC Markets UK chief market analyst Michael Hewson noted that Netflix’s share price recovery since the five-year lows of last year had stalled in the last quarter, having hit a nine-month high in January in the wake of its 4Q results where revenue beat expectations and subscriber numbers blew through forecasts.
Turning to Netflix’s upcoming results, Hewson noted: “As indicated in the 3Q shareholder letter Netflix is no longer offering guidance on subscriber numbers, but it would be rolling out paid sharing in 1Q, which might prompt some cancellations in the short term, as it looks to crack down on password sharing.”
He also pointed out that, in a nod to having to cut costs, Netflix announced last month that it would be cutting film output and streamlining its business model.
“The company has said it intends to consolidate the unit which produces small and medium size films which in turn will result in some job losses, as it looks to cut costs and improve its margins,” Hewson said.
Contact the author at emily.jarvie@proactiveinvestors.com
Follow her on Twitter @emilyjjarvie