Netflix shocked observers this week when it announced that after this year it will stop reporting its subscriber counts as part of its quarterly results. They will also not report an average revenue per user (APRU) figure, which has historically been a key figure used by analysts to measure the performance of the company.
This announcement came as an unpleasant surprise to investors, who punished the stock by driving down the share price by as much as 10% in a single week. Company executives explained that subscriber numbers were no longer a worthwhile metric to follow, saying instead that “revenue and operating margin” were the key factors to follow.
Analysts view Netflix’s decision as a sign that it sees recent subscriber growth as unsustainable. By cutting off access to this information while they are still riding high in terms of subscriber growth, the company could head off possible future concerns over subscriber growth stagnating. As one hedge fund manager explained to CNBC, “They don’t want to be held accountable to that metric.”
But in the short term, the move seems to have backfired as it soured investors on what was otherwise a very strong quarterly report. Netflix added 9.3 million new subscribers in Q1, more than double the number most analysts had expected. Netflix’s less expensive ad-supported tier of service has seen particularly strong subscriber growth, with over 23 million new users added to that service.
Last summer’s infamous “crackdown” on password sharing has also produced sustained subscriber growth. These sunny results make it all the more surprising that Netflix would decide to close the curtain on transparency.
