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Netflix


Fri, May 24, 2013, 2:42 AM EDT - U.S. Markets open in 6 hrs 48 mins

Netflix (NFLX) is on top of its game. With 29.17 million paid subscribers in the U.S., popular original programming and new licensing deals, the company seems unstoppable.

There is one large problem that stands in Netflix’s way. According to Bloomberg, up to 10 million users could be streaming Netflix’s video service without paying.

This is a problem for them, says The Daily Tickers Henry Blodget, but also an opportunity.

Instead of banning viewers who use other people’s login information, Netflix is attempting to embrace them -- for a small additional fee. Right now, two simultaneous streams per account are allowed for $7.99 a month. Netflix has announced a new pricing option that allows four concurrent video streams per account for $11.99 a month.

Netflix CEO Reed Hastings commented on the new service during the company’s Q1 2013 earnings call.

“We really dont think that there is much going on of the Im going to share my password with a marginal acquaintance,” he said. He also told investors that he expects less than 1% of users will opt for this new pricing plan.

Though seemingly innocuous, the pricing change might make some investors feel queasy. It was only two years ago that Hastings decided to change Netflix’s pricing model by increasing membership fees and creating Qwikster -- an idea that not only failed miserably but also lost Netflix 800,000 users and 75% of its value.

The new service may entice some users but it won’t solve the problem of password sharing. The company may not seem concerned about widespread account sharing right now but it has the ability to become a costly problem.

“They do have an issue where they incur a cost with a stream and they have to pay for the bandwidth to do that,” say Blodget. “In some cases they have to do a revenue share or licensing fee per stream so they are incurring costs.”

Right now, however, Hastings would like to get people excited about watching Netflix, even if they are streaming it for free.

Got a topic you’d like covered? Have a guest you’d like to see interviewed? Send an email to: thedailyticker@yahoo.com.

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