News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
It’s about a lot more than borrowing your parents’ Netflix password. Okay, it’s mostly about borrowing your parents’ Netflix password.
The streaming company missed revenue estimates by 1.24% last week, sending its share price tumbling. That’s even as Netflix beat earnings estimates by a wide margin of 15%.
This quarter’s results were a test of Netflix’s performance amid its crackdown on password-sharing, as well as its offering of a less-expensive, ad-supported tier. The results here could speak not just to Netflix, but the questions of if, and how, digital services can succeed through differentiated pricing.
“Every time Netflix does something, others follow,” Rick Munarriz, a senior media analyst with The Motley Fool, told NPR. “It is the ultimate influencer without taking selfies.”
In one sense, the results for Netflix are positive: Subscribers grew at a rate more than three times what analysts estimated: 5.9 million versus 1.9 million. The company showed revenue of $8.2 billion and an operating profit of $1.8 billion for the quarter. Clearly, though, the mix of dollars from its various offerings didn’t match up to Wall Street expectations.
Even as the company added subscribers, its average revenue per member was down 3% year over year. Two new components might or might not change that picture in the future, as they mature: The company said “Revenue from advertising and our extra member feature are not yet material enough” to contribute significantly to the bottom line.