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Analyst: Netflix password-sharing crackdown could be boon for revenue

MoffettNathanson concludes Netflix stands to earn $567 million in income if just 25 percent of streamers convert to the ad-supported tier of service.

MoffettNathanson concludes Netflix stands to earn $567 million in income if just 25 percent of streamers convert to the ad-supported tier of service.

The logo of Netflix appears on a smartphone. (Photo via Wikimedia Commons)
The logo of Netflix appears on a smartphone. (Photo via Wikimedia Commons)

Netflix could see hundreds of millions of dollars in annual revenue if it manages to convert just 25 percent of freeloaders into paying customers on its ad-supported streaming tier, according to a new analyst note from MoffettNathanson released last week.

The note is based on a survey sent to 19,000 American adult consumers, which found between 25 and 30 percent of freeloading streamers think they’ll eventually pay for their own Netflix account as the company implements a broad crackdown on password sharing.

If Netflix manages to convert one in four freeloaders to a paying customer on their ad-supported tier, Netflix stands to earn at least $567 million in incremental annual revenue, MoffettNathanson concluded.

“While this might not be the home run that the bulls believe, the near-term opportunity to continue adding subscribers in North America seems very likely,” Michael Nathanson, a principle analyst at MoffettNathanson, wrote in the report.

Netflix started cracking down on password-sharing in the United States earlier this spring after a limited test run in some Latin American countries. The streaming service warned investors of an initial spike in churn attributed to the strategy, which aims to push freeloaders toward any of its paid plans.

The strategy reminds customers that their accounts are intended to be used by members of their immediate household — family members, friends, room-mates and tenants who reside at the same address. For customers who want to share their accounts with those beyond their home addresses, Netflix gives subscribers the option to pay for the privilege of providing their passwords to others.

A report from analytics firm Antenna claimed Netflix saw an increase in sign-ups in the first few days of its password-sharing crackdown strategy. The report was based don credit card statements and other financial data Antenna collects and uses for its reports.

Netflix is set to report its third financial quarter earnings on Wednesday.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.
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