The End of Netflix Password Sharing: Consumers Are Outraged. But Should Investors Be Concerned?
Here's what the controversial move could mean for investors...
The End of Netflix Password Sharing: Consumers Are Outraged. But Should Investors Be Concerned?
Netflix's (NFLX) Q4 2022 earnings report sparked some controversy.
Not in the eyes of investors — who were so happy with Netflix's surprising subscriber growth that its stock price has popped 14% in the weeks since…
But in the eyes of users.
Why the disconnect? Well, the streaming giant is putting an end to password sharing, noting in its shareholder letter that it will roll out paid sharing more broadly in the latter half of the first quarter of 2023.
According to Netflix, 100 million+ households are currently sharing accounts, therefore undermining the company's ability to invest, improve, and build the streaming service.
LikeFolio data recorded an uproar in negative sentiment as soon as consumers caught wind that they will no longer be able to stream Netflix free without consequence, come April:
From cyberbullying to attacks on its original content to dredging up receipts from years past…
Consumers have taken to social media to lament Netflix's pivot — because it means they'll have to start paying.
Some account owners may cancel in protest… But will they truly desert the platform for the long haul?
While the whining may be loud, the truth is that Netflix only needs a small percentage of net new users for this move to be a big win.
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Many password sharers may accept that it IS time they got off their parent's accounts, especially now that a low-priced ad tier is in place.
Netflix higher-ups ultimately anticipated this reaction, as COO and CPO Greg Peters noted in the January earnings call:
“And, you know, I think it's worth noting that this will not be a universally popular move. So, there will be current members that are unhappy with this move. We'll see a bit of a cancel reaction to that. We think of this as, you know, similar to what we see when we raise prices, you know, so we get some increased churn associated with that for a period of time.
But then, generally, what happens is, you know, both from the, you know, the specific changes that we make, we'll see folks come on as new subscribers, essentially borrowers creating their accounts or incremental monetization through the extra member that'll happen shortly thereafter.”
Netflix might be in a bit of hot water with consumers right now, but it's expected to cool off.
LikeFolio data reveals mentions of new Netflix subscriptions are up +18% from last quarter, while Netflix viewership mentions have increased by +8% during the same period.
And investors are clearly liking what they're seeing from Netflix all the same: NFLX shares are up 24% so far in 2023.
It's too early to tell what will actually happen on the monetary side once the new password sharing policy officially takes effect in the U.S.
But if Netflix debuts another blockbuster series like Wednesday or Harry & Meghan, LikeFolio data (and common sense) tell us this outrage won't last too long.
Enjoy your weekend,
Andy Swan Founder, LikeFolio
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