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Television The Almighty Buck Businesses Movies Security

Netflix Could Reap $1.6 Billion Per Year By Charging Password-Sharing Users Extra Fees, Analysts Say (variety.com) 118

Posted by BeauHD from the let's-not-give-them-any-ideas dept.
If Netflix follows through with its test to charge an additional fee to users sharing passwords, it could rake in $1.6 billion in global revenue annually, according to a new Wall Street analysis. Variety reports: Last week, Netflix said it was launching a test in three Latin America countries (Chile, Costa Rica and Peru) to address password sharing. Customers will be able to add up to two Extra Member accounts for about $2-$3/month each, on top of their regular monthly fee. According to estimates by Cowen & Co. analysts, if Netflix rolls the program out globally it could add an incremental $1.6 billion in global revenue annually, or about 4% upside to the firm's 2023 revenue projection of $38.8 billion. The firm's estimate assumes that about half of non-paying Netflix password-sharing households will become paying members; further, the model predicts that of those, about half will opt to sign up for their own separate paid account.
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Netflix Could Reap $1.6 Billion Per Year By Charging Password-Sharing Users Extra Fees, Analysts Say More

Netflix Could Reap $1.6 Billion Per Year By Charging Password-Sharing Users Extra Fees, Analysts Say

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  • Or... (Score:3)

    by Åke Malmgren ( 3402337 ) on Friday March 25, 2022 @03:06AM (#62388185)
    They could piss off and lose subscribers. But analysts only see numbers, not the humans they represent.

    • Re:Or... (Score:4, Insightful)

      by Guybrush_T ( 980074 ) on Friday March 25, 2022 @03:23AM (#62388205)

      Reminds me of the movie folks explaining how piracy was causing billions of dollars of loss in revenue. As if you would have bought the hundreds of crap divX you were watching because you were bored.

      Yeah, stopping password-sharing would probably cause a bit of increased revenue in the short term. But not 1.6B, and long term it's not clear they would gain anything at all.

      • Expensive study group told pointy-haired-boss what he wanted to hear.

        News at 11.

        • Expensive study group told pointy-haired-boss what he wanted to hear.

          News at 11.

          Exactly.

          The last sentence:

          The firm's estimate ASSUMES that about half of non-paying Netflix password-sharing households will become paying members; further, the model PREDICTS that of those, about half will opt to sign up for their own separate paid account.

        • It works like a timeshare. You post the times when you want Netflix available on your subscription and we rent out the service to others when you won't be using it and pay you the rental fee minus our commissions.

          We log all of your queue and subscription settings then delete your queue for privacy, then restore it after the renter is done so there's no issues . The renter's credit card has a deposit on file if they try to vandalize or cancel your account so we can always restore your account perfectly for

      • I'm pretty sure they're pushing this narrative and even making the trials in South America (where they will start preventing password sharing) for two purposes: first is to see if this entices investors, so the stock rises again, and second to see if this applies well in places where piracy is yet well established (which I believ those countries still qualify as).

      • Ive been a netflix subscriber since the days of shipping dvds. Long before streaming. Lately ever 3-4 months I get a notice of yet another price increase. 10 cents here 20 cents there. Its now $20 for their shit service that spends more time writing in the latest SjW bullshit of the day than actually writing a half decent plot. Im about done with them. Especially if they decide just because my daughter, in a dorm, 30min away, occasionally watches netflix for the anime, needs to charge me even more. They wil

      • stopping password-sharing would probably cause a bit of increased revenue in the short term. But not 1.6B, and long term it's not clear they would gain anything at all.

        It all really depends on how much they are going to charge. The thing about permitting password sharing though is that providing more service costs them more money. For the most popular content it's probably mostly free for them because of their ISP-installed content appliances, but for anything else it's just more transfer that they ultimately have to pay for. So stopping password sharing will save them money, and it won't cost them much. Even if it made them no more money, it would be a win. Almost nobody

        • I think they should be careful about usage.

          I think most people using under 12 hours a month, will cancel.
          I think most people using 20+ hours a month, will convert.

    • Netflix losing "subscribers" who aren't paying for the service is not their primary concern.

      • Re: (Score:2)

        by larwe ( 858929 )
        There are other aspects to this scenario. For example: X pays for Netflix, and shares it with friends A,B,C. Maybe they even kick him a dollar or two now and then to help out. X uses Netflix a bit, but it isn't his primary source of entertainment. Netflix cuts off A,B,C. Now, X has to optimize his household budget. "I don't use Netflix that much, it was mostly my friends who relied on it" - and he cancels his subscription. Netflix loses one subscription, they do not gain three.

        • Now, X has to optimize his household budget. "I don't use Netflix that much, it was mostly my friends who relied on it" - and he cancels his subscription. Netflix loses one subscription, they do not gain three.

          Their new plan makes no sense. If I am logging into Netflix using a friend's account, and Netflix can tell that I am doing it, then why don't they just cut me off, for being an "unauthorized user"?

          I suspect that Netflix is testing this in a couple of small insignificant South American countries because they are aware that it could backfire.

        • There are other aspects to this scenario. For example: X pays for Netflix, and shares it with friends A,B,C. Maybe they even kick him a dollar or two now and then to help out. X uses Netflix a bit, but it isn't his primary source of entertainment. Netflix cuts off A,B,C. Now, X has to optimize his household budget. "I don't use Netflix that much, it was mostly my friends who relied on it" - and he cancels his subscription. Netflix loses one subscription, they do not gain three.

          So now A,B,and C have to decide wether to split the new costs 3 ways. I suspect a number will do that. There's also the case where X, A,B, and C all susbcribe to different services to share, so X has to decide whether to cut Netflix and lose Paramount, Disney, and CBS All Access.

        • I was doing this with Youtube TV. The cost was raised but I decided it was fine since I was using it along with my mom in another state.

          They started with the geo-checking and pretty soon my mom wasn't able to use it without a bunch of extra steps that had to be done every week. They did not get an extra subscriber out of this. They lost me as a subscriber.

          That said, if they would have done like Netflix and let me pay an extra few dollars, I probably would have went for it.

        • Re: (Score:1)

          by JoshZK ( 9527547 )
          I'll play devil's advocate. I can see someone dropping it if they don't use it. But why do you assume that none of the three will get their own subscription? I was one of the ABC's and ended up getting Netflix for myself. I'm going to say there will be more new subscriptions than people just adding their friends. My reason is, for the most part, people are cool about sharing but I'd feel bad if my buddy had to pay more. Of course, you can pay your buddy but that for me is awkward and I should just get my ow

          • Re: (Score:2)

            by larwe ( 858929 )

            why do you assume that none of the three will get their own subscription?

            Well, I think making that assumption is no less valid than Netflix assuming that those three _will_ get a subscription. But I think really where I was going with this is - there are umpteen sources of eyeball fodder. I do not know how genuinely sticky a Netflix subscription, specifically, is - if you have some people who are willing to buy their buddy a coffee now and then in return for access to his Netflix password - and Netflix makes the password sharing impossible - are those people then going to say "I

      • Re: (Score:2)

        by DarkOx ( 621550 )

        Right the question is will it cost them the subscriber that is paying.

        I know eight or ten years go when some of my younger siblings went off to school they still used my parents account. I am 100% my dad who probably watched one or two movies a month and was fine with it feeling like he got his $8 worth given the recent memory of $4 video rental fees at the time would have said 'screw this' and canceled the subscription in hurry if they started sending him nasty grams because his daughter watched from her d

        • I rarely shop at Walmart for example because of their insistence and checking receipts and stuff at the door. Screw that, I have arm full of stuff I am trying to carry (which is by that point my own property). I am carrying it all because they have all there employees standing around harassing people rather than doing something useful like retrieving the shopping buggies from the parking lot, forcing me hand carry everything. I am not setting all that stuff down to dig out a receipt to prove I am not a crim

        • Re: (Score:2)

          by brunes69 ( 86786 )

          In your scenario the dad would pay the extra $3 and be done with it.

          People who are sharing passwords and actually splitting the cost to save a bit of money because they can not afford full price, are exactly what Netflix is trying to capture with this change.

          People who are freeloaders (sharing an account among 3 or 4 family members and friends who are not paying anything), Netflix does not care about losing them.

          This is called "using pricing to capture the consumer surplus" and is pat of any econ 101 class.

          • Re: (Score:2)

            by DarkOx ( 621550 )

            I understand price discrimination fine. I can tell you though he would not pay the extra three dollars. In his mind, he is paying the $8 for something so his kid can use it, and he occasionally 'borrows it' not the other way around. He will see it as just a price hike, where they are trying to hold him up for an extra $3.

            He will think they should just charge everyone $9 instead of trying to stick it to a few very occasional users like himself. He will cancel on the spot. Trust me I know him better than y

    • Actuaries do actuary math, i.e. statistics. News at 11.

      This is obviously all subjective until we start to get some preliminary numbers from real customer interaction, but you can't fault the bean counters for making a few predictions based on the models they're already well familiar with.

      Hell, they were likely asked to make this sort of projection by C-level management.

    • They could piss off and lose subscribers. But analysts only see numbers, not the humans they represent.

      Bbb..but the perfectly rational never erring hand of the free market is not influenced by 'humans' in any way shape or form?!?! That's why we never have human panic induced stock market chaos at regular intervals and mathematical models are able to perfectly simulate and predict the way the market will be have every second of every day.

      • They're not going to do it, they're just telling us stuff then watching how social media reacts.

      • So, they're going to anger the people who are freeloading and they'll leave and stop freeloading? Why would this be a concern for Netflix?

    • Exactly. Such calculations are based on the flawed assumption that customers sharing a service are willing to pay the individual tariff. The fact that they are sharing should be a hint. They aren't. Most revenue increases in cases like this are in the "rounding error". So no, it is not getting 1.6B. If it earns 1.6M it should be opening the champagne. More likely it will not get even that and it will spend more than that on enforcement.

      • Re: (Score:2)

        by N1AK ( 864906 )

        Exactly. Such calculations are based on the flawed assumption that customers sharing a service are willing to pay the individual tariff.

        Ironic that you're entire post is equally or more dubious assumptions without evidence. It's currently trivially easy for 2-3 households to share a Netflix subscription, you're making the assumption that because households do this (saving $20-30pm between them) that this must mean virtually all of them weren't able and willing to pay if sharing the service was not possible.

      • Comment removed based on user account deletion

        • The bigger issue is how will it be enforced. Right now, expected Netflix watching behavior is to set up your credentials on several Rokus that are all in the same house (and thus have the same IP address), but also to set them up on your phones (which don't share an IP and might even roam regularly on non-mobile networks such as Office Wi-Fi systems.) If Netflix makes the wrong set of assumptions and incorrectly identifies someone as a password sharer, they'll have problems. If it happens a lot, they may end up shedding subscribers who'll be pissed off about the change.

          I don't know how they'd enforce it without false positives. My wife visited her home country for a month while I stayed in our home city. For that month, we had legitimate users in 2 different countries. Netflix couldn't distinguish that from my wife giving relatives in a different country our username / password. FWIW, we changed our password after she arrived home, but we still saw family using the account. Oh, with IP6, it'd be possible for different Roku's, smart phones, tablets, and smart TVs to have d

    • Statistically nobody is going to drop Netflix because they are cracking down on the already-prohibited practice of sharing passwords. A few people will drop them, while most people by far will not. Some of the people currently using shared passwords will start paying, some won't. I'd bet most of them will, because they're effectively getting discount Netflix and it will still be cheaper than any other streaming service (except maybe HBO, after they offer you a discounted rate to keep using their service bec

      • Re: (Score:2)

        by N1AK ( 864906 )
        I'm inclined to agree that it seems unlikely that many people will drop it. However, Netflix is more than Disney+ in the UK and the cheapest plan is the same price as Amazon Prime (inc video) so it isn't the cheapest option by any means; not making any judgement on value for money etc.
    • They could start showing ads. First, just to these people identified as sharing passwords and when that doesn't bring enough revenue, to all subscribers. Because subscribers are just going to share their password with someone eventually.

      • They could start showing ads. First, just to these people identified as sharing passwords and when that doesn't bring enough revenue, to all subscribers. Because subscribers are just going to share their password with someone eventually.

        I predict that won't work out well for them. Part of the reason people pay for subscription services is not to be bothered by advertising. Adverts will just drive more people to torrenting, because it's free and because the people who post torrents often remove advertising before they do so.

    • Re: (Score:2)

      by DrXym ( 126579 )
      I'm sure they've done the calculations themselves and have decided they'd come out ahead by getting rid of freeloaders or charging them for the privilege. I bet a number of people will actually be surprised to learn there are people sharing their account - former flatmates and so on.

    • They could piss off and lose subscribers. But analysts only see numbers, not the humans they represent.

      They're looking at net numbers, and their models show more will pay extra or subscribe in order to not lose Netflix. The wild card in this is how much content on Netflix is compelling enough to pay extra for? I suspect at an additional $2 a morepeople will simply pony up and buy the subscription than cancel.

    • Re: (Score:2)

      by gweihir ( 88907 )

      They could piss off and lose subscribers. But analysts only see numbers, not the humans they represent.

      Indeed. the same broken calculations used for copyright infringement. Or they just believe their content is to world-shattering great that nobody can live without it...

    • I cancelled my subscription after the latest year-on-year $2 increase. They crept it up to nearly $20, and with platform fragmentation, there are fewer shows to watch. The entire notion of cord cutting no longer applies once it begins to cost as much as Cable TV

    • Allstate decided they could save a bunch of money by switching customers to email. The end result was that I was without insurance on my home for 2 days. I did *NOT* feel safe with Allstate. I could have been ruined financially.

      I switched *all* of my insurance to a different company that will send me paper envelopes with paper invoices 2 weeks before payment is due.

      I had no problem with my local agent. This was purely a corporate policy by some pencil pusher.
      I had no problem with Allstate's covering of

    • Re: (Score:2)

      by Dan667 ( 564390 )
      it reminds me of the satellite tv companies that are losing subscribers so they increase prices only to lose more Customer, repeat. I don't have any confidence in netflix reasoning any differently in this case.

    • Re: (Score:2)

      by tlhIngan ( 30335 )

      They could piss off and lose subscribers. But analysts only see numbers, not the humans they represent.

      If they do it right, they could gain some by being a less unpleasant option.

      Let's take you have 4 streams, if you try to start a 5th, it errors out. What if instead, the 5th stream starts, and the oldest of the 4 streams aborts out - knocks you back to the login screen. Even worse, it won't remember the show you just watched, or your position.

      That would make it enough of an inconvenience that you either do

  • Sure,

    The firm's estimate assumes that about half of non-paying Netflix password-sharing households will become paying members; further, the model predicts that of those, about half will opt to sign up for their own separate paid account.

    is interesting. But this would also open the door for those of us who follows today's terms and conditions to optimize the cost by having others terminate their full subscription and add them as "extra members" for a lower total cost.

    • I have been account sharing for years. I can also count the amount of times on my hands I actually watched something on Netflix. I really prefer plex since I can just automate my tv and movie downloads using sonarr and radarr all in one environment. I rather spend the money on the usenet and VPN + socks5 services over the various apps and walled gardens.

  • I share with my brother. But we share all streaming platforms.

    If sharing is made impossible - we will just rotate the platforms. couple months Netflix. couple months Disney. couple months HBO. couple months Amazon Prime.

    • Sounds like a lot of work to save 2 dollars, honestly.
      • Not really. I pick up platforms when a show I want comes on, keep it for a month or two to catch up on anything else they have and drop them. A lot of them will have $1 deals for the first couple months, if you're patient. There just isn't enough on any one streamer to justify paying year round. That said, I do have Netflix year round as its part of my t-mobile account.

      • Sounds like a lot of work to save 2 dollars, honestly.

        If you regularly fail to cancel subscriptions because it's "work," please contact me immediately. I have several valuable business ventures I'd like you to invest in!

  • The firm's estimate assumes that about half of non-paying Netflix password-sharing households will become paying members; further, the model predicts that of those, about half will opt to sign up for their own separate paid account.

    Those are quite some assumptions.

    The average user thinks the single-screen subscription stinks because it's not HD. The second option just was raised in price, making it no longer competitive, unless your household is bigger or you have someone to share with. The competition offers subscriptions as low as $3 a month.

    Oh, and last not least. Most their new shows have the same jokes, same story lines and probably same script writers as stuff we already seen. Same old stuff in new boxes. So, they may open up ne

    • Re: (Score:2)

      by jbengt ( 874751 )

      Most their new shows have the same jokes, same story lines and probably same script writers as stuff we already seen.

      Isn't that true of most all new shows?

      • Re: (Score:2)

        by Junta ( 36770 )

        Perhaps to some extent, but their competition has much more back-catalog. Decades of media produces significant number of good things.

        As netflix' access to back-catalog erodes more and more and all they have left are 'netfilx originals', they aren't in good shape since they have a much smaller production budget and less than a decade of time to have built up anything.

    • Re: (Score:2)

      by gweihir ( 88907 )

      Those are quite some assumptions.

      Indeed. Probably complete BS. The fact of the matter is that most people have a fixed entertainment budget and they will not suddenly drop something they actually care enough about to pay themselves for in order to re-acquire Netflix which they did not care enough about to pay themselves for.

  • firm's estimate assumes that about half of non-paying Netflix password-sharing households will become paying members

    And you need to pay "Cowen & Co. analysts" for these outrageous assumptions? When did this ever work when 50% of people getting something for free just settle to pay for it?

    • When did this ever work when 50% of people getting something for free just settle to pay for it?

      When Napster was shut down, many people started paying for streaming.

      • Re: (Score:2)

        by AmiMoJo ( 196126 )

        Streaming didn't exist when Napster was shut down. The alternative was buying MP3s from places like Amazon and iTunes. Remember that many people were using Napster on dial-up connections, it's that old.

      • When Napster was shut down, many people started paying for streaming.

        That was early March 2001: https://www.history.com/this-d... [history.com]

        What's the streaming service that got 30 millions users (half of Napster's 60 millions) after that? Can you name a popular streaming service from back then that could even accommodate such amounts of users? How would that work, many were on dial-up - which would work to download some single or even album and then you could put them on a CD (usually audio CD, even mp3 players were

      • Re: (Score:2)

        by suss ( 158993 )

        There were no music streaming services to speak of in 2001. People just started using other napster-like services, like emule and limewire, and later bittorrent...

  • Netflix is beginning its slow slide into irrelevancy. Every studio and their brother has their own streaming platform these days, and I'd imagine Netflix will be the first to get dropped when families reevaluate their household budgets.

    I realize some people actually like Netflix's original content, but to me it seems everything is some variant on "(Established trope), but with kids". Yeah, I get it Netflix, you like hiring doe faced kid actors because they're cheap. We'll see how long that really keeps t

    • Netflix IS degrading, to be sure. We canceled our subscription months ago. But this by itself isn't a reason to put up with users who don't pay.

      • Re: (Score:2)

        by Dan667 ( 564390 )
        netflix did not have to enable multiple users in their subscription, but they did. There was nothing saying how users could use the extra users and now that people are using them they want to take service away without offering the option to pay less for less users.
    • Netflix does everything possible to be cheap. Why do you think so many of their shows get canceled after year two? Its because rates go up in year three. A normal network will pay the extra cost on a hit show. Netflix algorithm determines whether they'll lose subscribers by canceling the show and using the money for something cheaper. If the answer is no, the show gets canceled.

    • Re: (Score:2)

      by tsqr ( 808554 )

      Sorry Netflix, you don't have Baby Yoda.

      Some people see that as a selling point for Netflix.

  • I share the account between my mother and sister in law. We also spoke the cost of the premium account. We also have Disney+ and another local service. If we were forced to pay the full amount ourselves, we'd just drop the service entirely. Neither my mum not sister in law watch more than a couple of shows a week. I don't they're pay either. Netflix is welcome to role the dice.

    • That's not what Netflix is doing. They are adding $2-$3 per person extra, not the full cost.

      If Netflix did this intelligently and only nagged people who had *concurrent* streams from different geographic IPs on the same account, then that would be fine by me. I am willing to pay a little more to have a sanctioned method of sharing my account with family that lives outside the house. If nothing else, $3/month is a lot better than $15/month if I choose to pass that cost along. And now we are all above board a

  • There are folks that pay for the full package now with multiple streams that will just lower their package. So instead of managing one $20 account they can manage two $10 accounts. For the most part Netflix has lost its edge I find myself watching other services more frequently.

  • How does this effect people with subs covering multiple simultaneous streams when one of the family members who lives at the main address, but travels on business and uses their own account in other cities and states?

    We dropped Netflix over a year ago when most of the stuff we wanted to watch either ended, was cancelled, or Netflix lost the rights to, but it's a legit question ...

  • Looks like the bean-counters are now in charge. The tighter they squeeze, the more will slip through their sticky little fingers.

    • Re: (Score:2)

      by gweihir ( 88907 )

      It will, but bean-counters cannot see the real world. They are all about saving pennies. "Save a penny, lose a million" is what can often be observed when the bean-counters make the decisions.

  • ...they already limit the number of concurrent streams. I've analysed my reaction to being charged more for exactly the same thing and I'm certain I would cancel my subscription. Ball is in your court Netflix. Choose wisely.

  • its none of their business whom I allow to use the seat.

  • We have a family of 6 and 2 houses and family that we visit annually in another country (They don't speak english and would have no use for our password). We don't password share but I am afraid we are going to look like we do.

  • I'm curious what they will do to accounts that have legitimate 'sharing'. When my mom is babysitting my sister's kids and they use my sister's account, is that ok? What about when my sister is at my mom's house and they watch a movie while my brother-in-law watches something at their house?

    Good luck enforcing fairly without pissing off customers.

  • "Netflix Could Reap $1.6 Billion Per Year By Charging Password-Sharing Users Extra Fees, Analysts Say"

    Yes, and I *could* win the lottery, but both of those things are unlikely.

    Very few will pay extra for a more restrictive version of something they already have.

    • Re: (Score:2)

      by gweihir ( 88907 )

      Exactly. Looks like these "analysts" were hired to justify some stupid up-coming decision by a bean-counter.

  • My son stays with his mother during school days but is at my house the rest of the time. If they start charging me that for my son, netflix can go and ill get another streamer to replace them. Been thinking about HBO for while.
  • They could at least improve the account owner tool set. At a bare minimum: 1) show stats on logins, 2) have an owner account independent of the watcher accounts, 3) allow owner to set limits based on geography, etc.
  • When revenue growth starts to slow, this is what you see. It's universal in big companies. No new revenue generators, or they've all failed to provide the growth you thought somehow was going to continue on forever? Start squeezing elsewhere on what you've already got. Employees, customers, facilities, whatever works. Do it for "your stakeholders", which is code for those guys on Wall street who arbitrarily set the value of our company based on how much money we can make for them.

  • People are strange, or maybe it's just the Gen Me mentality. They won't bat an eye spending a hundred dollars a month for overpriced cups of coffee at Starbucks, but will go ballistic that they have to pay an extra $2 a month for a Netflix sub-account. You're not supposed to be sharing the account, but Netflix never enforced it.

    • I've seen no evidence of anyone going 'ballistic' over this. Do you get upset at younger people over every news story you read? If so, maybe it's your mentality that's the problem.

    • They won't bat an eye spending a hundred dollars a month for overpriced cups of coffee at Starbucks ...

      The Millennial or GenZ'er who spends heavily per month on Starbucks is right up there with Nessie and Sasquatch on my list of mythical creatures you never see, but people swear they exist.

  • And ready to take a nap, because, hey, would could happen to their market share. I'm not sure if they've heard of Hulu or Disney . . . maybe they think they're only competing with cable?

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