Why Netflix delayed its crackdown on password sharing

Why Netflix delayed its crackdown on password sharing

New York (CNN) Netflix said on Tuesday it will proceed with a broad rollout of its paid account sharing option in the second quarter after being delayed in the previous quarter.

Netflix began restricting password sharing in four more countries earlier this year, but chose not to expand more broadly after “finding enough room for improvement” in early launches.

The delayed timing announced in the company’s latest earnings results may have compounded the company’s challenges in growing its subscriber base in the March quarter.

The company reported a net increase of 1.75 million global streaming subscribers, up nearly 5% from the same period last year but below expectations of more than 3 million Wall Street analysts.

Netflix said it saw a “cancellation reaction in every market when we announce the news” about the paid sharing option, but then it sees “increased acquisitions and revenue.” However, by delaying the rollout, Netflix said “some of the anticipated membership growth and revenue benefits will decline in Q3 rather than Q2.”

Tuesday’s earnings report is the first for new co-CEOs Greg Peters and Ted Sarandos after founder Reed Hastings stepped down and became executive chairman in January.

It was a pivotal quarter for Netflix as the company tries to unleash a slew of new revenue opportunities after a bumpy performance last year. including losing 200,000 subscribers in the year-ago quarter, which sparked a major sell-off. The company has also been working to expand its new ad-supported subscription offering that launched last year.

“Engagement at our ad tier is above our initial expectations, and as expected, we’ve seen very little switching from our Standard and Premium plans,” the company said in Tuesday’s subscriber letter.

Netflix reported revenue of about $8.2 billion for the quarter, up almost 4% from the same period last year and in line with analysts’ forecasts. The company’s quarterly revenue fell 18% to $1.3 billion.

Netflix said it expects revenue to grow nearly 5% to $8.2 billion in the three months to June, but forecast quarterly earnings to fall more than 19% from the same period last year.

The report comes days after Netflix screwed up what was supposed to be its second live show – the Season 4 reunion Love is Blind – and had to apologize to frustrated fans and pick the special up for streaming. Unlike its streaming competitors, Netflix has long been resistant to live streaming because of its high cost. But faced with stiffer competition, Netflix has begun experimenting with the format, which it appears hasn’t perfected yet.

Netflix also said Tuesday that it would officially shut down the DVD rental service that made it a household name this fall.