Netflix Can Add $1.6 Billion in Annual Revenue with Expansion of Password Sharing Fee: Analyst

(Image credit: Netflix)

Netflix could add as much as $1.6 billion to its bottom line, says one equity analyst, by expanding a test it's currently conducting in Latin America, whereby it is charging extra to customers who share their passwords with constituents outside their home. 

“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,” wrote Cowen & Co. analyst John Blackledge in a note to investors. 

Last week, Netflix disclosed a test it's conducting in Peru, Costa Rica and Chile, whereby subscribers are now charged an additional monthly fee for sharing their passwords with up to two friends, family members and hangers-on living in their home. The fee varies slight from country to country, but it is $2.99 in Costa Rica.  

According to a recent survey conducted by the Advertising Research Foundation, nearly half of U.S. Netflix users share their Netflix username and password with a person -- or persons -- living outside their domicile. 

For his part, Blackledge estimates that 10% of the nearly 116 million broadband homes in America have individuals accessing Netflix without paying a subscription fee.

Blackledge bases his estimate on a hypothesis that half of Netflix's password-sharing subscribers globally begin paying the fee, which would spike Netflix's projected 2023 revenue of $38.8 billion by 4%. ■

Daniel Frankel

Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!