What’s the Great Netflix Password Crackdown Worth? Maybe $3 Billion

For Netflix, password sharing isn’t cool. You know what’s cool? New members.

With the whole password-sharing crackdown, the streaming king may have stumbled into an greater financial windfall than it hoped. A March 29 research report from equity analysts at Wells Fargo, obtained by IndieWire, suggests that of the people currently borrowing a Netflix login, more will end up as new standalone subscribers instead of becoming lower-cost add-ons.

For about 30 million paid sharers in the United States and Canada, they will likely be asked to fork over $7.99 per month to add an extra member on the existing account. Wells Fargo sees 15 percent (4.5 million paid sharers) taking that option, with a worst-case estimate of 10 percent (3 million) and best case 20 percent (6 million).

However, the analysts believe that 25 percent (7.5 million paid sharers) of those currently borrowing or sharing the service will give in and create their own Netflix account. (Worst case: 20 percent/6 million, best case 30 percent/9 million.) Bottom line: Of those 30 million password lenders, the analysts think 40 percent (or 12 million) will convert from freeloaders to upstanding subscribers, one way or the other.

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Netflix’s entry-level plan, Basic with Ads, is $6.99 per month; ad-free it’s $9.99. The Standard plan, the one you probably have that allows for downloading and same-time usage on two devices, is $15.49 per month. Premium, which offers the best audio/visual experience and allows for downloading and simultaneous usage on six and four devices, respectively, is $19.99.

By our math, $15.49 is greater than $7.99. (I’ve got an MBA.) For Netflix, it’s much greater.

Adding 7.5 million new domestic members via paid sharing alone vs. Wall Street’s 2023 estimate of 2 million is a damn good start. It also could bring $1 billion to $2 billion in extra revenue. The international opportunity is potentially greater.


Camille Razat as Camille in Episode 304 of Netflix series "Emily in Paris"

Camille Razat as Camille in Episode 304 of Netflix series “Emily in Paris”

MARIE ETCHEGOYEN/NETFLIX

There are an estimated 70 million paid sharers outside the U.S. and Canada, which could bring an extra 14 million net adds at a new-revenue range of $900 million to $2.5 billion.

Wall Street currently sees Netflix adding 15 million paid subscribers worldwide in 2023. Wells Fargo thinks it could be more than 20 million and believes the recent Netflix stock (NFLX) rally — shares rose from about $294 a week or so ago to roughly $340 today — “reflects early bullishness around the paid sharing opportunity.”

Makes sense, considering we’re talking potentially $3 billion in found revenue. Here’s what also makes sense: Wells Fargo’s NFLX target price of $400 — along with its belief that shares could go as high as $560. It’s starting to feel like the old days.

Tempering all this optimism is a report Forbes Home published earlier this month, in which 35 percent of its 1,000 respondents claimed they would cancel Netflix if prices go up and password-sharing is enforced. Think about that for a moment: 35 percent of Netflix’s 230 million global subscribers is a whopping 80 million subs. If the poll’s threats came to fruition, Netflix would be back to early 2019 numbers.

See the results for Netflix and other streamers below. The same survey found that Netflix was the most-popular streaming service and the most beloved.


Forbes Home Survey: Which streaming service would you cancel if prices — and regulations — went up?

Courtesy of Forbes

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