Netflix reported yesterday that first-quarter revenue rose 3.7% year over year to $8.1 billion, which Refinitiv said was roughly in line with analysts’ expectations. Net income for the quarter was $1.3 billion, compared to $1.6 billion in the year-ago quarter.

The video streaming service said it gained 1.8 million net paid subscribers at the end of the quarter, below expectations of 2 million. The total number of paid subscribers was about 233 million.

Overall, the total number of subscribers increased only 1% from the previous quarter. The company expects revenue of $8.2 billion in the next three months, up 3% year-on-year and again slightly below analysts’ expectations.

With growth so slow, it’s important to track down free riders. Netflix said last year that 100 million households share passwords. Cracking down on the practice could help turn some of those illegal viewers into paying members, and the company is experimenting with how to do that in markets like Canada and New Zealand.

That’s where Netflix’s recently introduced – and less costly – ad-supported subscription comes in. If the company manages to sign up half of the estimated 30 million password holders in the United States and Canada to this $7-a-month plan, it could generate $1.3 billion in revenue. Including debt, the company trades at nearly 5 times expected 2023 revenue, as calculated by Morgan Stanley analysts, which could add $6 billion in value. And that’s not even taking into account potential advertising revenue.

Given Netflix’s overall size, that may not seem like much, but combined with other factors in the company’s favor, it’s starting to add up. Chief among them is renewed restraint on content spending, which the company behind shows like „Wednesday” expects to add $500 million more to free cash flow this year than the previously estimated $3.5 billion.

Thanks to this focus on the penny, Netflix is shedding its image as a money-burning content factory. Free cash flow has been rising steadily in recent quarters and is expected to top $7 per share this year, according to Refinitiv, up from about negative $6 per share before the 2018 pandemic.