If and when Netflix adopts Stateside password-sharing fees currently being trialed in Latin America, 13% of U.S. subscribers surveyed said they'll cancel their Netflix service. And the streamer might actually end up losing a couple hundred million a year of revenue on the gambit.
This is according to Aluma, a new research firm headed by former The Diffusion Group chief Michael Greeson. Aluma surveyed 2,200 adult U.S. consumers in April and asked them what they'd do if Netflix started charging an additional $3 for each family member, friend or hanger-on using their Netflix account, but not living their home.
According to Greeson, 12% said they'd pay for at least one individual living outside their residence.
During its legendarily downer first-quarter earnings report issued last month, Netflix said it was going to seriously look at making some of the 30% of users who share service worldwide pay their freight. Another research company, Bruce Leichtman's Leichtman Research, found that the password-sharing mob is pretty evenly split among those who pay and share (15%) and those who don't pay and take (15%).
Exploring the Possible Impact
So, given Netflix's North American base of around 75 million users, would, say, 9.5 million of them really cancel service overnight if Netflix started charging an additional $3 per month per password sharer?
Having spent two decades comparing "proclivities" declared during consumer surveys with actual behavior, Greeson believes "less than half" of cancellation threateners would actually end up following through on their declaration.
Still, if it were, say, 6.5% leaving the service, that would still represent around 5 million customers, and that's "$900 million in [annual] lost revenue," Greeson noted.
On the other hand, he believes that "at least 12%" of Netflix's domestic base would pay the extra $3.
“Adding $3 per month to a father’s Netflix bill versus his daughter at college having to pay $15 per month is quite compelling," Greeson said.
Continuing to do the "back of the napkin" math to indulge Next TV in a Thursday-afternoon email discussion, Greeson noted, "Assume they will sign up for on average of 1.2 out-of-home users per account. That’s nearly $260 million in new revenue."
Admittedly very speculative bottom line based on Aluma's compelling survey: Netflix could actually end up losing a significant amount of revenue on password sharing fees.
Meanwhile, addressing the broader narrative as to why Netflix has suddenly stopped growing, Greeson encouraged Next TV to look beyond a factor we've been aggressively hammering home -- that supply-chain-induced slowdowns of smart TV sales are the primary influencer.
"It’s larger than that," Greeson said. "Domestically, we’re nearing saturation in residential broadband subscriptions, which trickles down into smart TV/streaming device sales, as well as subscriptions to streaming video services. I predicted several years ago this would happen early in the 20s, which was logically obvious to anyone paying close attention to slowing subscriber/sales growth in these spaces."
Notably, Comcast and Charter, the leading suppliers of residential high-speed internet in the U.S., sold roughly half as many new ISP subscriptions in the first quarter relative to Q1 2021.
And no, based on this shareholder suit filed against Netflix Wednesday, a day in which streaming growth bubble might burst does not seem to have been "logically obvious" to Wall Street denizens.
