Does the sharing economy slow down the growth of Netflix? – The madman

One of the effects of recent technological and societal advances is that of the sharing economy. Where previous generations were more likely to become homeowners, the millennial generation is moving away from more and more and is more likely to use shared services such as Uber, Lyft and Airbnb. According to a Country Financial report, approximately 54 percent of Americans routinely use a maintenance, home-sharing or maintenance service.

The sharing economy and the resulting mindset also have unintended consequences for those in the streaming industry. Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), and Hulu are the most widely used consumer direct-play platforms, drawing together 47% of the US population, according to the study. Unfortunately, not all users pay for this privilege.

Share is loving?

The study found that nearly three in four Americans, or 74% of those who use platforms like Netflix and Hulu, share their accounts with others, while 42% pass on their Amazon Prime ID . The research found that 73% of users sharing an account gave access to a family member, 34% to relatives, 10% to friends and 2% would even share their password with their ex.

With sharing passwords, it's easy to conclude that streaming companies like Netflix are gaining fewer and fewer subscribers thanks to all the freeloaders.

Show in the results?

The last quarter of the company seems to confirm it. Netflix released Q2 results well below expectations, mainly due to disappointing earnings for subscribers. The company added only 5.15 million new customers, significantly less than the planned 6.2 million.

In the company's letter to shareholders, Netflix Chief Executive Reed Hastings said, "Our quarterly forecasts are our actual internal forecasts at the time of the release of the guidance report."

The company recorded stronger-than-expected growth in the first quarter, with 7.41 million net subscribers, more than a million more than the forecast 6.35 million, which could have accounted for its second-quarter loss .

A different view

Netflix has been aware of sharing passwords for a long time and does not seem to think that it is a problem. In fact, Netflix CEO Reed Hastings said the practice was "a positive thing".

"We love people sharing Netflix, whether it's two people on a couch or 10 people on a couch," Hastings said. "It's a positive thing, not a negative thing." Most passwords are shared between immediate family members, and Hastings said he sees it as a "formidable marketing vehicle for the next generation of viewers."

It should also be noted that other research has come to a different conclusion. According to a study by Ampere Analysis, a Netflix-specific study found that password sharing occurred in less than 1 in 10 households, representing about 9 percent of respondents. The research also found that the practice was less prevalent in established markets – like the US (around 8%) – while newer markets, like France, had the highest percentage of shared access about 12% of households.

"There is a widespread belief that password sharing between Netflix homes is common, but our data tell a different story," said Guy Bisson, Research Director at Ampere Analysis. "One of the most striking aspects of Netflix account sharing is that it is incredibly consistent across all markets," he said.

Walk slowly

Netflix has account sharing limits and may potentially apply these rules, but since the company believes that account sharing leads to new subscribers, it is unlikely that the practice will be repressed any time soon. Even in light of its rare shortage in the last quarter, the total number of subscribers reached 130 million, up 25% over the corresponding quarter of the previous year.

With growth of this magnitude, it does not appear that the practice of password sharing is hurting Netflix's progress significantly.

John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Danny Vena owns shares in Amazon and Netflix. The Motley Fool owns shares and recommends Amazon and Netflix. Motley Fool has a disclosure policy.