All that anecdotal password sharing we've been hearing about is more than just a few media savvy friends passing around their logins: One analyst estimates that something like 10 million people watch Netflix Instant, gratis, reports Bloomberg. For a company with 33 million paying streaming customers, that's a ton of free riders. Much to the delight of the freeloader crowd, however, Netflix's streaming service actually sanctions this kind of sharing. Per the company's terms of service agreement, Netflix allows multiple people to access an account using one subscription:
YOU MAY INSTANTLY WATCH ON UP TO SIX UNIQUE AUTHORIZED NETFLIX READY DEVICES. YOU WILL BE ALLOWED TO INSTANTLY WATCH SIMULTANEOUSLY ON TWO SUCH DEVICES AT ANY GIVEN TIME
That could all end, of course, if Netflix decides it could make more money by cracking down on freeloaders. Getting all those people to pay $7.99 a month would be ideal, but it's a tricky game. Families might not want to buy an account for everyone in their families. And the last time Netflix raised prices, users left en masse.
So far, Netflix's open strategy is working well enough. For all those users who swap passwords with their friends and families, the streaming service still gets millions to pay the monthly fee. Netflix has a much lower price barrier to entry than HBO Go, which requires a cable subscription, plus an HBO subscription on top of it, to access its online library. (Though that seems to be working as well: An HBO spokesperson told The New York Times that "[t]he best business approach at the time is in the business model that we currently have.) Between its doubling down on addictive original programming and its relatively low-cost streaming service, Netflix has built a bundle that still keeps loyal (paying) customers satisfied. Analysts expect Netflix to report 29 million U.S.-only subscribers this quarter when the company announces its quarterly earnings this evening, up from 27 million last quarter. By our calculations, that would be more than enough to make the $100 million House of Cards investment well worth the investment.
This article is from the archive of our partner The Wire.
We want to hear what you think about this article. Submit a letter to the editor or write to email@example.com.