At least initially, Netflixs broad password crackdown appears to be producing the streamers desired results in converting freeloaders into paying customers in the U.S., according to early data from research company Antenna.
On May 23, Netflix began notifying U.S. customers that users on their accounts who live outside their households would need to be added as an extra member (or get their own subscriptions). Since then, Netflix has had the four single largest days of U.S. user sign-ups since January 2019, when Antenna first began tracking the metric.
Based on the most current Antenna data available, Netflix average daily sign-ups reached 73,000 from May 25-28, a 102% increase from the prior 60-day average. That was more than the spikes in subscriber sign-ups Antenna recorded during the initial U.S. COVID-19 lockdowns in March and April 2020.
Netflix U.S. cancelations also increased over May 25-28 a phenomenon the company told investors it expected but those were less than the number of sign-ups, according to Antenna. The ratio of sign-ups to cancelations since May 23 increased 25.6% compared with the previous 60-day period.
In the U.S., Netflix has told customers they must buy an extra member at an additional $7.99/month for anyone who doesnt live with them that currently uses their account. The streamer has said it willstart blocking devices that attempt to access a Netflix accountwithout having legitimate account access.
Source: Antenna. Notes: U.S. only; excludes free tiers, pay-TV distribution and select bundles According to New York-based Antenna, its estimates are based on millions of permission-based, consumer opt-in, raw transaction records, which are sourced from a variety of data collection partners. The data includes online purchase receipts, credit, debit and banking data, and bill-scrape data.
Amid widespread global economic uncertainty, our view is that [Netflix] should be able to deliver solid subscriber and financial results by better monetizing the 100M+ households that use NFLX product (via password sharing) but do not (currently) pay for it via higher ARPU and/or conversion to pay subscribers, Pivotal Research Group analyst Jeffrey Wlodarczak wrote in a note Friday.
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Netflix is the worlds clearly dominant streaming video player, according to Wlodarczak, with strong medium/long term growth that is not properly reflected in the current valuation. He noted that the companys recently introduced ad-supported plan, which Netflix said had attracted nearly 5 million subs in the first six months, also should contribute to better results. Importantly, [Netflix], unlike its streaming peers, has demonstrated massive scale economies which is evidenced by the major ramp in free cash flow in 22/23, a trend we expect to continue 24+.
Pivotal Research raised its year-end 2023 target on Netflixs stock from $425/share to a Wall Street high $535/share, mostly driven by an increase in estimated EBITDA (forecast to grow at a CAGR of 20% through 2027) and to a lesser extent the effects of increases in our free cash flow expectations in 23 and beyond.
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