Netflix's Profile Transfer Could Add 15M Paid Accounts, Says Cowen
Paid account sharing could bring Netflix 15 million additional U.S. and Canadian paid sharers and a million new members, Cowen analyst John Blackledge wrote investors Wednesday, after its Tuesday announcement it will begin rolling out its Profile Transfer globally early next year to more broadly monetize account sharing.
The feature lets people using a subscriber’s account keep their personalized recommendations, viewing history, My List, saved games and other settings when they start their own membership. Netflix will notify account holders when Profile Transfer is available on their account, and the company will give account holders the opportunity to pay for Netflix for some friends or family they want to share the service with, said Greg Peters, chief operating officer-chief product officer, on the company’s Wednesday earnings video.
Netflix sought a “balanced position and approach” toward shared accounts to support customer choice while making sure “that as a business, we’re sort of getting paid when we’re delivering entertainment value to consumers,” Peters said. Subscribers can create a subaccount, which Netflix is dubbing Extra Member, he said. “We’re trying to come up with a range of options that support customer choice," he said, while ensuring a “sustainable business model” that allows the company to invest in content.
Peters declined to say which new initiative -- Extra Member and new accounts or the Basic with Ads ad-supported tier announced last week (see 2210130058) -- is expected to bring in more revenue, calling them complementary. “Paying for Netflix for somebody that you want to share that service with, that's a legitimate need,” Peters said, and creating a lower price tier monetized by ads addresses a “legitimate need to get to all the great content that we're making.” The company wants to “speak to a range” of different consumer needs, price points and feature sets, he said.
Basic with Ads, which launches Nov. 3 (see 2210140024), should reduce churn and drive a “re-acceleration of subscriber growth,” Wedbush Securities analyst Michael Pachter wrote investors Wednesday. The analyst expects Netflix to add an incremental $100 million from U.S. and Canadian subscribers alone from the $6.99-a-month plan, assuming $10 in advertising ARPU, 4.5 minutes per hour of ads, 35 viewing hours, 15% or more subscribers switching to the ad tier and more than 5 million new or returning subscribers signing up for the ad tier. Wedbush maintained an “outperform” rating on the stock.
For Q4, Netflix forecasts 4.5 million paid net additions vs. 8.3 million in the year-ago quarter. It projects $7.8 billion in revenue in the quarter, a sequential decline from $7.9 billion in Q3, due to the strengthening dollar. Netflix announced it will no longer provide guidance on paid membership, which Vice President-Finance Spencer Wang said was due to the wide range of price points offered globally and “the impact of any given subscriber can be quite different.” Shares jumped 13.1% Wednesday, closing at $272.38.
Commenting on the evolution of the streaming video market, co-CEO Reed Hastings noted Netflix and Disney are “investing heavily and will be two big brands in the premium space,” while YouTube will continue to grow on connected TVs. Sports will be an area of focus “depending on how Sunday Ticket lands,” he said, referencing the end of DirecTV’s rights for Sunday football after this season and the expected move to a streaming service. Mentioning Apple, Amazon or "somewhere else,” Hastings said, “You’ll start to see a bunch of people focus on sports and bringing that over to on-demand.”