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Why Netflix delayed the password-sharing breach




New York (CNN) Netflix said Tuesday it will move forward with a broad rollout of its paid account sharing option in the second quarter, after delaying it last quarter.

Netflix began cracking down on password sharing in four additional countries earlier this year, but chose not to expand further after it “found enough room for improvement” from early launches.

The delayed timing, announced in the company’s latest earnings results, may have contributed to the company̵[ads1]7;s challenges growing its subscriber base during the March quarter.

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

Netflix said it has seen a “disruptive reaction in every market when we announce the news” of the paid sharing option, but then it sees “increased acquisitions and revenue.” However, in delaying the rollout, Netflix said that “some of the expected membership growth and revenue benefit will fall in Q3 rather than Q2.”

Tuesday’s earnings report marks the first for new co-CEOs Greg Peters and Ted Sarandos, after founder Reed Hastings left the role to become executive chairman in January.

It was a crucial quarter for Netflix, as the company seeks to raise a number of new revenue opportunities after a rocky performance last year, including losing 200,000 subscribers in the year-ago quarter, which triggered a major selloff. The company has also been working to expand its new ad-supported subscription offering, which was launched last year.

“Our ad-level engagement is above our original expectations and, as expected, we’ve seen very little switching from our standard and premium plans,” the company said in its subscriber letter on Tuesday.

Netflix reported revenue of about $8.2 billion for the quarter, up nearly 4% from the year-ago period and in line with analysts’ estimates. 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 ended June, but expects quarterly profit to fall more than 19% from the same period a year earlier.

The report comes days after Netflix shelved what was supposed to be its second live show ever — the Season 4 “Love is Blind” reunion — and had to apologize to frustrated fans and pick up the special for streaming. Unlike its streaming rivals, Netflix had long been resistant to live streaming because of the high costs. But in the face of stronger competition, Netflix has begun experimenting with the format, a format it apparently has yet to perfect.

Netflix also said Tuesday that it will officially discontinue the DVD rental service that made it a household name this fall.



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