Netflix will no longer report subscriber numbers — which has been a key metric for streaming services for years — beginning with the first quarter of 2025.
The company made the announcement in releasing its first-quarter 2024 earnings Thursday. Netflix handily topped expectations for subscribers net adds, gaining 9.33 million in the period, to reach nearly 270 million globally. It also beat Wall Street expectations on the top and bottom lines.
Despite the Q1 earnings beat, Netflix shares dropped more than 3% in after-hours trading Thursday, possibly as investors reacted negatively to the news that the streamer will stop reporting quarterly sub totals.
In its Q1 letter to shareholders, Netflix said that engagement — time spent with the service — is its “best proxy for customer satisfaction.” As such, it will no longer report quarterly membership numbers or average revenue per member (which it dubs “ARM”), as of Q1 2025. Netflix said it will announce “major subscriber milestones as we cross them” but will cease disclosing quarterly subscriber numbers.
Netflix continues to see solid subscriber gains in markets around the world; for example, it netted 2.53 million new customers in the U.S. and Canada in Q1. But eventually those sub numbers will start to plateau, and the company wants to reorient investors toward time-spent-viewing metrics where it has more potential upside in the years ahead.
Co-CEO Greg Peters said on the earnings call that Netflix’s number of subscribers has been a decreasingly relevant measure for the health of the company’s business. He cited, as an example, Netflix’s paid-sharing initiative, which gives primary account holders the option to add an “extra member” for an incremental monthly fee (and those “extra members” are not counted as separate subscribers). Meanwhile, with Netflix’s advertising plan, higher engagement is tied to higher revenue per member, as opposed to the fixed per-sub revenue on the plans with no ads.
“As we’ve noted in previous letters, we’re focused on revenue and operating margin as our primary financial metrics — and engagement (i.e. time spent) as our best proxy for customer satisfaction. In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” Netflix said in the letter. “But now we’re generating very substantial profit and free cash flow (FCF). We are also developing new revenue streams like advertising and our extra member feature, so memberships are just one component of our growth.”
The company continued, “In addition, as we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact. It’s why we stopped providing quarterly paid membership guidance in 2023 and, starting next year with our Q1’25 earnings, we will stop reporting quarterly membership numbers and ARM.”
According to Netflix, it will continue to provide a breakout of revenue by region each quarter and the foreign-exchange impact “to complement our financials.” Going forward, the company will add guidance for annual revenue in addition to what it already provides: annual operating margin and free cash flow forecast and forecasts for quarterly revenue, operating income, net income and earnings per share.
Last December, the company released its first “Netflix Engagement Report,” inclusive of more than 18,000 titles and nearly 100 billion hours viewed between January-June 2023, representing 99% of all viewing during that period. In the report, Netflix divulged streaming performance metrics for licensed content. It plans to release the data twice per year — mainly to highlight the massive engagement across a wide range of content on its service.
“Success in streaming starts with engagement,” Netflix said in the shareholder letter in discussing the decision to stop reporting subscriber numbers. “When people watch more, they stick around longer (retention), recommend Netflix more often (acquisition) and place a higher value on our service. It’s why we’ve been providing progressively more information on engagement, starting with our Top 10 weekly and most popular lists and more recently our biannual report into viewing on Netflix (which covers ~99% of all video watch time on our service). This is more information than any of our competitors provide, and we expect to provide even more over time.”
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