Netflix sharing crackdown should add revenues and users - Evercore
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Netflix's (NASDAQ:NFLX) latest (and expanded) approach to a crackdown on password sharing is set to be a boon both to membership and revenues, Evercore ISI says.
The streaming giant took an approach it was testing in Latin America and expanded it this week to four more countries (Canada, New Zealand, Portugal and Spain) - bringing the total to seven countries, though not yet Netflix's big home market of the United States.
In a nutshell, the approach involves adding tools to help subscribers manage access and devices; allowing existing profiles to easily transfer to a new membership, easing that path; and allowing households to "buy an extra member" for an add-on cost that's still less than that of a whole new ad-free account. And the new expansion bumps extra-member pricing a bit higher from the Latin America test.
"Overall, we believe in the medium term, this should be incremental to both [average revenue per user] (from those who start paying extra for the Extra Members) and Subs growth (from those who skip the hassle and sign up for an independent account)," Evercore's Mark Mahaney says, adding that subs growth can especially get a bump considering Netflix's new "Basic with Ads" tier comes at a discount to the "extra member" fee on ad-free accounts.
Meanwhile, Evercore's surveys show 30-40% or more of Netflix's account borrowers are either "extremely likely" or "very likely" to pay a little more to keep service.
"While we do not expect Netflix to immediately convert its 100MM global borrower households, we do see a potential for $1B-$2B total revenue upside over time from the Extra Member rollout â or up to 5% upside to Streetâs 24E Revenue," Mahaney said.
Extra-member accounts cost an extra C$7.99 per month in Canada; NZD$7.99/month in New Zealand; â¬3.99/month in Portugal; and â¬5.99/month in Spain.