Netflix‘s announcement to cease sharing subscriber numbers from 2025 has caused its shares to tumble, stirring concerns about the company’s future growth and prompting fears that other streaming services may abandon this crucial industry metric.
This shift marks a significant strategy change for Netflix, which has been a critical metric followed by investors and analysts to gauge the company’s performance against competitors like Walt Disney Co and Warner Bros Discovery.
The decision follows a period of strong subscriber growth for Netflix, which saw a significant increase in customers partly due to its crackdown on password sharing.
This policy change contributed to a notable rise in new subscribers, with 9.3 million additions in the first quarter alone.
However, despite these gains, there are indications that the U.S. streaming market is reaching saturation, a factor highlighted by a report from Antenna in February showing a sharp decline in growth.
“Industries tend to work in unison and if one of the leading players decides it is better that investors judge performance on different measures, rivals might adopt the same logic,” said Dan Coatsworth, an investment analyst at AJ Bell.
This sentiment is echoed by Brandon Katz, an entertainment industry strategist for Parrot Analytics, who noted, “While this is partially a sign of Netflix’s unrivaled market share, it also raises questions about the streamer’s ultimate ceiling in the current landscape.”
The market reacted negatively to the news, with Netflix’s stock dropping 7.3% to $565.85, marking its largest decline since July.
This fall came in the wake of a second-quarter revenue forecast that failed to meet analyst expectations, potentially reducing the company’s market valuation by approximately $19 billion if the losses persist.
Looking forward, Netflix is exploring new growth avenues, such as enhancing its content variety and quality and expanding its advertising business.
Wolfe Research speculated that Netflix might also consider entering sports media, potentially bidding for NBA media rights.
This would represent a shift from its current strategy focused on non-live sports content, like the Formula One docu-series ‘Drive to Survive’ and WWE.
“Netflix leaps from subs to engagement (and less disclosure) at a pivotal moment: the NBA’s media rights sale. Will Netflix spend $1-3B for some of the NBA’s media rights?
“We think so. Sports is the biggest slice of the pay TV pie, and Netflix can accelerate sports brands’ globalization,” Wolfe Research commented.
This strategic pivot reflects Netflix’s broader ambitions to diversify and enhance its service offerings as the streaming landscape continues to evolve.