Netflix Inc (NASDAQ:NFLX) is pleased with its rollout of paid sharing, said CFO Spence Neumann, speaking at the BofA 2023 Media, Communications & Entertainment Conference on Wednesday.
Neumann told listeners that the company had over 100 million "borrowers" that were not paying for Netflix, but they had to address it to drive a "sustained flywheel of healthy revenue growth."
The company has seen a more muted cancel reaction as a result of the roll-out, as well as a better retention of its existing members. As a result, the streaming giant sees healthy characteristics going forward in terms of bringing on new paid members, both in terms of individual accounts and extra members.
The Netflix CFO also revealed that the password-sharing crackdown will continue to roll out across a few quarters.
When it comes to the streaming service's new ad-tier subscription, Neumann revealed there is a healthy mix of sign-ups across the various plans, although they skew slightly more towards ad-free accounts.
Neumann also believes the ability for advertisers to buy into the top ten titles is a positive. However, he feels the company's advertising build-out is still in its infancy, but the firm is confident in the long-term advertising opportunity being a big incremental revenue and profit contributor to the business.
Even so, the CFO acknowledged it would have to be built over time, with the company working on the scale and reach, with advertisers preferring a scaled solution. He commented that the company needs to work on better ad targeting and relevance capabilities.
Moving onto the company's operating margin, Neumann revealed that it peaked at 21%, but they have been managing in the roughly 18% to 20% range, although, it has started to tick up from last year. He acknowledged that it is best to grow the operating margin with revenue, although he noted it is not prudent for the company to keep growing at a 3% operating margin per year.
"Given our scale, now that we are at roughly 20% operating margin, I don't think it's really prudent for us to keep growing at three percentage points of margin per year. I think that would probably constrain the business too much," he commented.
Instead, the company will look to grow margins more gradually.