The practice of sharing passwords to access digital content is rampant, but Netflix, Inc. (NASDAQ:NFLX) is not worried despite being one of a major victims of what was recently declared a federal crime. A court recently ruled that people who share their password with friends or family can be prosecuted for criminal action.
But Netflix, Inc. (NASDAQ:NFLX) is saying you don’t have to worry stealing access to its movies as long you are not generating income for yourself. If you are only giving family and friends the opportunity to enjoy Netflix’s offerings through your account but not engaged in generating income through password sharing, the company is encouraging you to continue.
It is not clear how long Netflix will allow or encourage people to share their accounts, but so far it considers that practice to be in its best interest. The reason Netflix is not worried about password sharing is that it considers those who do it to be marketing its business. For instance, if you share your Netflix account password with a family member of friend, you end up spreading the Netflix gospel.
But when time comes for Netflix to say enough is enough with password sharing, those who are already hooked to the service will have no option but subscribe to the service directly.
Who’s streaming Netflix through the backdoor?
Netflix doesn’t share details of accounts sharing on its platform, but it is estimated that at some 65% of Netflix subscribers share their accounts with at least one other person. It is further estimated that 19% of Netflix users share their accounts with at least three other people. That says that while there may be many people streaming Netflix, only a few pay for the service.
Netflix recently expanded into 130 countries, a move that is expected to dramatically increase its global audience. It is not clear how that global expansion is going to affect account sharing, but it could be a great way for more people abroad to get to known about Netflix before the company begins to force them to pay.
Netflix is set to release its 2Q2016 earnings today after markets close. In the last quarter, the company’s EPS of $0.06 exceeded the consensus estimate of $0.03 but revenue of $1.96 million fractionally missed the estimate of $1.97 billion.