Netflix Adds 4-Stream Family Plan But May Lose Content in 2013

Netflix

Video service Netflix posted positive results Monday for its first calendar quarter of 2013 and the company is now moving to expand its appeal to an even broader customer base. As expected, Netflix announced a new family plan to accommodate heavier users of its streaming service.

As part of the company’s $7.99 streaming-only package, users are limited to two simultaneous video streams. As online streaming becomes more popular each year, and as the Netflix video library grows, more subscribers are hitting that 2-stream limit, according to Netflix CEO Reed Hastings. Until Monday, the only solution for these families was to create an additional Netflix account.

With the new family plan, priced at $11.99 in the U.S., that streaming limit is doubled to four. While this won’t accommodate all users, the switch does give larger groups of subscribers a bit more space when managing their  Netflix streams.

The switch to four simultaneous video streams does not affect the liberal log-in policy. While Netflix accounts are limited to two or four simultaneous streams, there is no limit on the number of computers or devices that can log-in to an individual account. As a result, large families, parents with kids at college, or even a group of friends living in separate parts of the country could all share a single account as long as they weren’t all watching content at the same time.

Prior to the company’s report Monday, some expected Netflix to institute a change in policy to deal with this arguable oversight. Michael Pachter, a analyst for Wedbush Securities, estimates that as many as 10 million people currently take advantage of this policy to watch Netflix streams without paying. But Netflix would likely face another consumer backlash, similar to the Qwikster fiasco in late 2011, for such as change.

Monday’s report was also the first since Netflix launched its first original production, House of Cards, a political drama based on the 1990 BBC miniseries of the same name. In a bold move, Netflix released all 13 episodes of the show’s first season at once, allowing users to watch the show without weekly interruptions in the same way that users currently watch past seasons of others shows on Netflix.

Netflix CEO Reed Hastings

Netflix CEO Reed Hastings

Despite offering month-long free trials that would allow potential customers to easily watch the entire season for free and then cancel, Mr. Hastings told investors that the release schedule actually worked in the company’s favor by “reinforcing our brand attribute of giving consumers complete control over how and when they enjoy their entertainment.” According to Mr. Hastings, “less than 8,000 people [signed up for the free trial and then canceled once it was over], out of millions of free trials in the quarter.”

The company also reported that it would begin to roll out individual “profiles,” a long-awaited feature, in the coming months. Profiles would give individual users of a single account a unique experience tailored to their specific tastes while browsing the Netflix library.

Although Netflix seems to be firing on all cylinders, its resurgent success may lead to disappointment from its users as the company takes a new approach to content deals. The past few years have seen Netflix held hostage by content companies that aim to charge significantly increased rates for the streaming rights to their movies and television shows, or refuse to license them altogether.

With the initial success of its original content experiment, and its coup to grab first-run rights to Disney films late last year, Netflix now seems more confident in its approach to content companies. As an example, Mr. Hastings told investors that the company would let a “broad” deal for Viacom content lapse next month, although the two companies may continue to negotiate licenses for specific shows. This would lead to an immediate loss of popular streaming content, including kid favorites like Dora the Explorer.

Still, the company’s 29.2 million subscribers seem content for now, and Wall Street rewarded the firm with a boost that has the stock price (NFLX) up nearly 23 percent at the time of publication.

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