Netflix Inc (NASDAQ:NFLX) may see its user numbers fall following its password-sharing crackdown, with 62% of password borrowers saying they would stop using the streaming service due to the policy, according to a survey from US firm Jefferies.
Netflix said it plans to clamp down on password-sharing during the first quarter of 2023, the details of which were revealed last week for users in Chile, Costa Rica and Peru where Netflix is testing its anti-account sharing features.
The posted rules for these locations include a requirement for all devices using the same Netflix account to be linked to the same Wi-Fi, for all devices to log in to that Wi-Fi every 31 days, and for users to set a primary location which has to be a television.
READ: Netflix plans crackdown on password sharing
The guidelines drew outrage online with subscribers threatening to cancel their accounts, and the Jefferies survey results also reflected this reaction to the policy.
The survey showed that if password sharing ends, 62% of account holders said they would stop using Netflix, 16% would upgrade the account they are using to include their household, 12% would subscribe to Netflix with ads, and 10% would create their own account.
When asked why they would stop using Netflix, 35% said they can replace it with other services, 31% said they do not enjoy the content enough to pay for it, 25% said they cannot afford the monthly subscription, and 9% said they only care about the major hits.
Amazon Prime was the top alternative service that the survey respondents said they would use without Netflix at 42%, followed by Hulu at 35%, Disney+ at 26%, and HBO at 20%.
'Cancel reaction' expected
Netflix expects its password-sharing crackdown will not be a popular move, with co-CEO Greg Peters stating in the company’s recent 4Q earnings call that the streaming expects to see a “cancel reaction… similar to what we see when we raise prices.”
The Jefferies analysts forecast a 21% retention of password borrowers in 2023, growing to approximately 45% by the end of 2024.
Given password borrowers are currently not paying for their own Netflix subscription, any retention of these users after the crackdown is a win for the streaming giant.
The analysts reiterated their ‘Buy’ rating for the stock with an increased price target of US$425, up from US$400.
Netflix shares were trading down 0.3% at US$364.92 at midday on Monday.
Contact the author at emily.jarvie@proactiveinvestors.com
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