The password is…not!
Netflix (nflx) – Get a free report It said it plans to step up its crackdown on password sharing, which has cost the streaming service provider billions in revenue every year.
The company said in a Letter to shareholders of January 19 that it expects to start rolling out co-payments more broadly later in the first quarter.
“Today’s widespread account sharing (more than 100 million households) undermines our long-term ability to invest in and improve Netflix, as well as build our businesses,” the company said. “While our terms of use limit Netflix usage to one household, we recognize this is a change from members sharing their account more broadly.”
The company said it had worked hard “to create additional new features that enhance the Netflix experience, including the ability for members to check which devices are using their account and to transfer a profile to a new account.”
Netflix posted weaker-than-expected fourth-quarter earnings, while adding far more subscribers to its expanded streaming platform than Wall Street had forecast.
The company also said that Reed Hastings would step down as co-CEO to take over as CEO.
Crackdown can be costly in the short run
“As we work through this transition, and as some borrowers stopped watching because they didn’t convert to additional members or full paying accounts, near-term engagement, as measured by third parties like Nielsen’s The Gauge, could be negatively impacted. “. the company said.
“However, we believe the pattern will be similar to what we’ve seen in Latin America, with engagement growing over time as we continue to provide great programming and borrowers sign up for their own accounts.”
Netflix added 7.66 million paid subscribers during the quarter, nearly double Wall Street’s forecast, thanks to hits like “Wednesday,” “The Watcher,” “Harry & Meghan” and “Dahmer” boosting earnings in the Americas. from North.
The company could end up earning $1.6 billion in global revenue a year if it cracks down on password sharing, according to estimates by analysts at Cowen & Co.
Netflix posted annual revenue of $31.47 billion last year.
Citi analyst Jason Bazinet said in 2021 that Netflix and other US video streaming services lose about $25 billion a year in potential revenue due to password sharing.
Bazinet estimated that Netflix accounts for about 25% of that total, which means the company could be missing out on roughly $6 billion in revenue.
