Netflix, Inc. (NASDAQ:NFLX) is definitely reveling in its latest quarterly earnings report, which crushed most expectations on Wall Street, as evidenced by the company’s stock shooting up more than 20 percent during the trading day to surpass $200 a share after bottoming out at about $55 a share less than a year ago.
Riding that momentum, Netflix CEO Reed Hastings has announced a new subscription service that he admits may not add much revenue to the company, but it still will add some flexibility to the company and may be an indicator of future steps Netflix, Inc. (NASDAQ:NFLX) might take to increase its margins, as it continues to pursue original content and existing broadcast licenses for other programming.
Currently, Netflix, Inc. (NASDAQ:NFLX) subscriptions allow users to stream two pieces of content simultaneously (in our house, for example, I could watch “Numb3rs” on my tablet while my wife can watch “Poirot” on our laptop) and hook up a single account to as many as six devices between laptops, smartphones, PCs and tablets (we have four such devices in our house from which we can watch content from our one Netflix account).
For those bigger families or those families with very different tastes in programming, Netflix says it will launch a family plan subscription for $11.99 a month, which would allow up to four simultaneous streams.
In this example, then, should I wish to upgrade my Netflix, Inc. (NASDAQ:NFLX) account, I could watch “Numb3rs” on my tablet, my wife cold watch “Poirot” on her smartphone, our son could watch “Thomas the Tank Engine” on our desktop and our cat could watch “House of Cards” on our laptop – all at the same time. Apparently a political drama puts our cat to sleep.
Hastings admits that he only sees or expects about 1 percent of the 29 million Netflix, Inc. (NASDAQ:NFLX) subscribers to upgrade to the family plan. But it seems pretty clear that isn’t about the family plan itself; it’s about trying to get the most out of the subscriptions.
Another feature that is coming is called Profiles, which can be applied to shared accounts. My wife and I have some similar tastes in movies and TV shows, but we do have variations in programs we’re interested in watching, and we combine everything onto one queue. With Profiles, each of us could establish our own queues based on our individual tastes.
It is a question whether Profiles can be effectively monetized, but with that plus the family plan concept, it seems that Netflix, Inc. (NASDAQ:NFLX) may be moving toward establishing some new restrictions on accounts in order to grow margins. What do you think? Do you like the family plan or Profiles concepts, or do you agree that these are both bottom line moves? Let us know in the comments section below.
DISCLOSURE: I won no positions in any stock mentioned.
