Netflix's password-sharing approach could bring 4% revenue upside - Cowen

Mar. 23, 2022 9:58 AM ETNetflix, Inc. (NFLX)By: Jason Aycock, SA News Editor29 Comments

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Netflix's (NFLX -1.4%) new test of monetizing password sharing promises some incremental revenues with a wider rollout, Cowen says.

The streamer recently said that it would test a feature in three countries (Chile, Costa Rica and Peru) encouraging subscribers to pay a few dollars extra a month to allow a profile or two outside of the household - less than the price of a full subscription, but a way to draw some money from password sharing that goes on now.

"We think Netflix's recent efforts reflect a natural progression across more mature markets, and could add incremental subs and revenue if the test is rolled out globally," says Cowen's John Blackledge.

If the test works and Netflix rolls the program out globally, he estimates it could add some $1.6 billion in global revenue, or 4% upside to the firm's 2023 revenue estimates.

That's based on an assumption that in a wider rollout, half of non-paying Netflix households would become paying members, and that those new payers would be split between those paying up to $3 as an "extra" sub and those paying average revenue per user for each region.

Cowen's monthly survey suggests there's a market for the new feature: Some 42% of U.S. users share a Netflix password, it says, and 10% of respondents said they had access to the service but aren't current subscribers, up from 7% in the first quarter of 2017.

Blackledge has an Outperform rating on Netflix and a $600 price target, implying 59% upside.

Wall Street overall has a Buy rating on Netflix, while Seeking Alpha authors have a Hold stance. Netflix's Quant Rating is also a Hold.

For its part, Benchmark is skeptical that the new plan can be a growth "game-changer."

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