Netflix is already enjoying the spoils of its crackdown on password sharing. Watch other streamers follow in his footsteps, once again; let’s call it the new Netflix effect.
The first returns on paid sharing are promising. In the immediate aftermath of Netflix’s May 23 note to U.S. subscribers implementing the new rules, Netflix had its biggest four days of U.S. signups in more than four years. (Probably longer; that goes back to Antenna research.) At least in part on those efforts to monetize former freeloaders, last week, a pair of Wall Street analysts sharply raised their price targets for the stock. Netflix (NFLX). Wells Fargo stock analysts see stock value at $500 a share again in the not-too-long future.
March’s research by those same crunchers estimates Netflix’s paid sharing plan could bring in an additional $3 billion in annual revenue. Before the launch of paid sharing, Netflix estimated that 100 million users were borrowing someone else’s (paid) account; 30 million of them came from the United States and Canada. The math is fine.
Yes, it’s a good time to be Netflix again; and it’s been a while since we could say for sure. Now, with the entire media industry bowing to Netflix’s business plan in the past, who’s next to take a stand on access sharing? IndieWire polled a cross section of industry analysts, from banks to blogs. Our results in a caveat: Borrowers may want to start binging on their Disney package wish list right now.
Colin Dixon, founder and chief analyst at nScreenMedia, sees Max as the next streamer to stop you from using your father’s account. Alicia Reese, an analyst at investment firm Wedbush Securities, had Max as one of her two most likely (early) followers. She makes sense: With his premium programming, like Netflix, Max has earned his high monthly subscription rates and low churn.
“If anyone can, it could be Max,” echoed Omar Mejias, equity analyst at Wells Fargo. There’s just one catch: “But they just changed the app/name so that would probably be a way out.”
Steven Birenberg, owner and chairman of registered investment adviser Northlake Capital Management, agrees with that assessment. Warner Bros. Discovery execs shouldn’t “distract” from their recent rebrand by immediately following up on a Netflix-like crackdown on pay-sharing, he told IndieWire.
Alan Wolk, co-founder and lead analyst at streaming site TVREV, had yet another reason why Max had to stay out of it – again, for now. “With HBO, there’s still a lot of confusion about people switching to Max from their cable subscription,” he told us, “so they probably won’t do any kind of crackdown right away.”
Yes, it can be a little awkward for some to switch from linear HBO to a streaming service that no longer even carries Home Box Office in its name.
But surely some streamer is next, right? Maybe not; for a while, at least. “The attrition rate for others is too high, so I’m not sure if they want to jump right in,” Mejias said.
It’s true: A quick way to lose paid subs is to cut off their hand-picked freeloaders. But someone has to get into this found money revenue stream, right?
If not Max, it will be Disney+, Reese said. This is also what her colleague Michael Pachter picked out in a separate conversation. Birenberg sees it the same way.
Reese’s reasoning was Disney+’s intense and ongoing drive toward profitability, a pressure likely felt there more than any other streamer. (Netflix has been profitable for some time; Hulu is also believed to be profitable. Warner Bros. Discovery’s direct-to-consumer portfolio, which also includes Discovery+ and just made a surprise quarterly profit in the US, should now be profitable for the year.)
A crackdown on password sharing makes sense for any streamer with the following attributes, Reese said:
- Most of their subscribers on an ad-free/premium membership level.
- An ad-based subscription tier they can offer to former piggy-backers.
- Must-have content (it’s best if the crackdown occurs around major releases, but consistently strong releases must follow or abandonment will only be delayed).
Check and check and check for Max. It’s check and check and sort of check for Disney+, in our book.
You know what would help? If Hulu were to be fully integrated with Disney+. A full combo beyond the upcoming (optional) card would bring in more library titles and greater perceived value, and help balance the mix of children’s and adult programming. A crackdown on account sharing would help in another way, Jacquie Corbelli told IndieWire.
“Fully monetizing their subscriber base will help address the profitability challenge in Disney’s streaming model,” said the founder/CEO of BrightLine, a connected TV (CTV) advertising solutions company. Mirroring Netflix in this specific way would be “a natural piece” of that “economic equation.”
Wolk agrees with all of that, but has one more point that applies to Hulu first and foremost. Save Netflix, Hulu has been in the game the longest, so why shouldn’t the same streamer follow the industry following on this one? Wolk also believes there is more Hulu password sharing than Disney+.
Anybody else? How about all the others, for Corbelli. Amazon Prime Video “and others” will follow Netflix in cracking down on paid sharing “within the next 24 months,” she said.
“The profit model for streaming industry leaders is under severe pressure, and this is a simple and fair way to support subscriber revenue that helps offset the enormous cost of providing premium video content,” Corbelli said. .
Speaking of the pitch, Birenberg believes Paramount+ may be “desperate” enough to try paid sharing as a means to get an immediate one-time subscriber boost. Peacock is less likely to crack down on password sharing because of its ties to parent company Comcast’s broadband efforts, he said.
To go the extra mile, we’ll give Birenberg the final say here, even if his is a sentiment others have shared in their own words.
“I doubt any of them will make a move before we see how the Netflix crackdown goes in the US,” Birenberg said. “None of the others have the international scale and reach of Netflix, so I think they would be hesitant to mess with their core US market without a point of proof from Netflix that it works.”
Additional reporting by Brian Welk.