Netflix will take action against users who share passwords

Netflix Inc. may soon discover how many of your users they will agree to pay to use their services. The video streaming giant may be taking a stronger stance against people who share account passwords, testing a feature that prompts non-paid viewers to sign up. A key question for Wall Street is how many of them will become paid users. While several analysts are convinced that most will not want to give up access to programs such as “Bridgerton” The “Queen’s GambitThe decision is creating uncertainty at a time when several competing services are adding millions of subscribers.

Netflix has underperformed as investors assess its outlook after the Coronavirus pandemic. The stock has risen about 3% in the past six months, compared to a 13% rally in the Nasdaq 100 index. Shares fell 1% on Monday.

For Matthew Harrigan of Benchmark Co., the poor performance will likely continue “as global consumers” stop sitting in front of the screen ahead of the implementation of the COVID-19 vaccine. The drastic password measures could decrease Netflix’s pricing power, he noted.

Drastic measures around passwords could reduce Netflix’s pricing power.

Last week, Needham indicated that the user cancellation rate – the number of customers who abandon their subscriptions – was the biggest risk for Netflix in 2021.

Meanwhile, BMO Capital Markets is more bullish, saying the strategy could “help boost some gross subscriber additions.” Bloomberg Intelligence recently wrote that the strict measures “could increase revenue by 10%”, although the strategy “runs the risk of alienating users, which could lead to a higher churn rate.”

Predictions for the percentage of subscribers who share their accounts with people outside of their homes vary. Bloomberg Intelligence said that between 20% and 30% of Netflix’s 74 million nationwide users may be sharing this information, while market research firm Magid estimated that a third of subscribers do, citing a survey conducted last year.

Netflix did not immediately respond to a request for comment, but in a statement to the New York Times, it noted that the user advisory was intended to “help ensure that people who use Netflix accounts are allowed to do so. “.