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Netflix CFO: Multiple Stream Sub Plan Coming This Year

16 May, 2012 By: Erik Gruenwedel

Netflix plans later this year to roll out a subscription plan enabling multiple users within a household to stream content on different devices, CFO David Wells told an investor group.

Speaking May 16 at the 40th annual J.P. Morgan Global Technology, Media, and Telecom Conference in Boston, Wells said the undefined priced subscription is the result of a growing number of users accessing Netflix from one account at the same time.

The CFO said that 18 months ago, 80% to 90% of Netflix streaming subs were single users on separate accounts. That percentage has dropped as families adopt Netflix, resulting in multiple users attempting to access content on different devices.

“We see more and more of that,” Wells said.

He said currently households seeking multistream access have had to “cobble together” a solution through Netflix customer service, purchase a hybrid disc and streaming plan allowing more than two concurrent users or subscribe to separate accounts.

Wells said the majority of streaming occurs on the television, but that there is increased viewing on tablet computers and laptops in other areas of the home. Netflix doesn’t expect the multiuse plan to have a huge impact initially, but expects the concept to grow in popularity over time.

The CFO didn’t elaborate on the pricing for the multistream subscription, but said it would focus on delivering content and user-interface based on individual viewing habits.

“When you want to watch, it knows it is you but not your spouse or your child,” Wells said. “There’s a much more targeted experience.”

Netflix is projecting 7 million net subscriber additions in 2012, resulting in a streaming base of about 30 million members. The Los Gatos, Calif.-based rental service also has about 10 million disc and hybrid disc and streaming subs. J.P. Morgan expects Netflix to generate about 5 million gross sub additions, ending the year with about 25 million net streaming subs.

Wells said more than 30% of new subs are returning members who left Netflix within the past 12 months. The CFO didn’t give a date when the multistream plan would launch.

“I don’t think that immediately we’ll see any sort of [device] segmentation happen from multistream households,” Wells said. “But over time that will grow. There is plenty of concurrent streaming happening, but the majority is still on the television.”

He said the initial purpose of the multistream plan would be to generate incremental revenue from higher-use households. Wells admitted that over time such a plan could result in “average subscription price leverage” on the current individual $7.99 monthly fee. Much of Netflix's foreign expansion is funded by domestic subscribers, with hybrid members generating the highest margins.

Indeed, when Netflix last fall intiated a 60% rate hike and attempted to spin off its disc service, it resulted in a major PR snafu and the exodus of nearly 1 million subscribers.

“In general, it’s not to frustrate our consumers,” Well said. “We’re trying to solve a very inelegant [current] solution today. It will also enable more personalization as well.”

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