Netflix delays its password-sharing crackdown as it ends DVD-by-mail service for good

Netflix has postponed its long-touted crackdown on password sharing and will permanently shut down the DVD mail service the company originally launched some 25 years ago.

The streaming giant shared the developments on Tuesday, as it reported a rise in first-quarter subscriber growth that beat analysts’ expectations, but revenue fell slightly short of Wall Street forecasts.

Netflix said it added 1.75 million new subscribers for the quarter ended March, nearly 550,000 more than FactSet’s consensus estimates, and a stark contrast to the loss of 200,000 subscribers the company suffered in the same period last year.

Last year’s unexpected drop in subscribers prompted the company to crack down on password sharing and introduce a new, cheaper tier of ads.

The password-sharing ban was initially slated for a global rollout at the end of March, but Netflix now said it expects to complete the transition in the US by the end of June, with new features that will prompt users to get their own accounts.

Netflix is ​​permanently shutting down the DVD mail service the company launched some 25 years ago

Netflix has been testing different approaches to the password sharing problem internationally and is expected to offer subscribers the ability to create sub-accounts for additional users outside of their household for a small additional fee.

The company also announced that it is discontinuing the DVD-by-mail service that the company originally launched a quarter of a century ago.

Netflix co-founder Marc Randolph described in his autobiography how he and co-founder Reed Hastings had flirted with the idea of ​​challenging Blockbuster Video with mail-order VHS cassettes, but it would have cost too much.

Instead, they landed on a more cost-effective proposition: DVDs sold and rented online. Blockbuster filed for bankruptcy in 2010.

Netflix ended March with 232.5 million global subscribers to its video streaming service, but it stopped disclosing years ago how many people still pay for DVD-by-mail delivery as that part of its business steadily shrank.

When Netflix attempted to split its DVD rental business from online streaming into a separate service called Qwikster in 2011, it sparked howls of protest from consumers. The plan was eventually scrapped.

The postal service had been on a steady decline over the past decade, generating just $145.7 million in revenue last year.

The DVD service, which still delivers movies and TV shows in the red-and-white envelopes that once served as Netflix’s emblem, plans to ship its last discs on Sept. 29.

In 2002, Netflix co-founder Reed Hastings sits in a cart full of pre-made DVDs. Netflix originally delivered DVDs by mail before moving to streaming

Netflix ended March with 232.5 million worldwide subscribers to its video streaming service. The photo shows a scene from the fourth season of You, which premiered in February

After initially falling as low as 11 percent, shares of Netflix quickly rebounded and traded roughly flat during Tuesday’s extended trading after the results were announced

Netflix reported earnings of $1.3 billion, or $2.88 per share, in the first quarter, down 18 percent from the same time last year but slightly above analysts’ forecast, according to FactSet.

Revenue rose 4 percent from last year to $8.16 billion, a notch below analyst estimates.

After initially falling as low as 11 percent, shares of Netflix rallied quickly and traded roughly flat during Tuesday’s extended trading after the results were announced.

“This was pretty much a business-as-usual quarter for us,” Netflix co-CEO Ted Sarandos said during a video call discussing the results.

While Sarandos has been co-CEO since 2020, the January-March period represented the first quarter he led the company with Greg Peters, who was promoted to co-CEO in January when co-founder Reed Hastings ended a long reign at the rudder.

“The company is ahead of where it was at this time last year, but is still clearly under pressure from all the players in this crowded space,” said Third Bridge analyst Jamie Lumley.

Now Netflix is ​​trying to get revenue from an estimated 100 million viewers who have used other people’s subscriber passwords to watch Netflix TV series like “The Crown” and movies like “All Quiet On The Western Front.”