Netflix’s paid sharing strategy boosts subscriber growth and revenue potential

Netflix (NASDAQ:NFLX), on Monday, revealed that its paid sharing feature has started to deliver promising results. The company plans to roll out paid sharing across all operational countries, which is expected to fuel revenue growth in the latter half of the year.

The feature was introduced after successful trials in select Latin American countries and has since been expanded to over 100 countries. This expansion covers more than 80% of Netflix’s revenue base and contributed to a substantial increase of 5.9 million subscribers in the second quarter.

During a recent investor conference hosted by Bank of America (NYSE:BAC), Netflix’s CFO Spence Neumann highlighted the immense growth potential that lies ahead for the company. He noted that through paid sharing, Netflix could potentially convert over 100 million viewers into paid members. This represents a significant opportunity for monetization. In the U.S., for instance, Netflix charges $7.99 per month for paid sharing. Alternatively, password borrowers can opt for their own account with plans ranging from $6.99 per month (basic with ads) to $19.99 per month (premium).

Even if a small fraction of these 100 million free users convert to paid members, it would significantly impact Netflix’s bottom line. For example, adding 10 million new members at $7.99 a month would generate $960 million in pure profit.

Neumann also clarified that the paid sharing rollout will span over the next few quarters, which should continue to drive growth in the user base.

The company also stands to benefit from global streaming growth due to its strong international presence and extensive local-language content. While operating margins are projected to be between 18% to 20% this year, similar to last year, Neumann believes there’s potential for this figure to increase significantly, especially as content spending seems to have plateaued and even declined last year.