Skip to content

Netflix (NFLX) Password Strategy Yields Long-Term Revenue Opportunity

Ollie Martin - AskTraders News writer
Ollie Martin trader
Updated 23 Mar 2022

Trade NFLX Stock Your Capital Is At Risk

Key points:

  • Netlfix continues it's monetization battle with a new ‘password sharing' cost strategy
  • The feature will be tested in Chile, Costa Rica and Peru before deciding on a wider rollout
  • A study by Cowen found that amongst 2,500 U.S consumers, 42% share a password
  • Analyst John Blackledge claims the strategy could bring in an extra $1.6b in global revenue

Netflix (NASDAQ: NFLX) has had a difficult start to 2022; confidence in the world-renowned global streaming service has started to wane in the face of various company obstacles. Firstly, growth is slowing to worrying levels, leaving the company anxious as to future revenue predictions. Sellers don’t need to be told twice when it comes to slowing growth, and buyers remain inactive, focusing on poor growth metrics in comparison to their rivals in the streaming sector. 

Both Netflix and Disney+ appear to be clutching at straws in terms of securing strong routes to monetization. In the latest development, Netflix is trialing a contentious ‘password sharing’ strategy, which will involve paying a slightly higher subscription to be able to share passwords – a commonality amongst the Netflix audience. 

Read Also: Best Tech Stocks To Buy Right Now

The new monetization feature will be initially tested in Chile, Costa Rica, and Peru before a wider rollout to the US and beyond. Whilst only a few dollars extra, the strategy targets a sizeable portion of Netflix viewers; with Cowen’s survey of 2,500 U.S consumers suggesting that 42% of U.S users share a password. Applying this to a wider demographic, if Netflix is able to monetize the shadowed 42%, it could give the company the step-up it needs in growing revenue. 

Cowen analyst John Blackledge points out that 10% of respondents in the Q1 to date survey are able to access the service but are not subscribed, up from 7% in a Q1 2017 survey; showing a clear growing trend in password sharing. Blackledge argues that if Netflix’s test works and the company opts for a global rollout, the company could benefit from an extra $1.6B in global revenue. This could be the ticket that Netflix management is looking for. With subscriber growth not likely to soar anytime soon, ulterior monetization strategies are critical if Netflix wishes to stay relevant and lucrative.

Ollie Martin - AskTraders News writer
Oliver is a financial writer and analyst specialising in the US stock market, with years of personal experience in understanding micro/macroeconomic structures, market trends and fundamental analysis.