According to one media analyst, Netflix's controversial password sharing crackdown, which has angered users and concerned investors, might not be a bad thing after all, at least according to one of the media analysts.
The company has been looking at this for a long time. Jason Helfstein, the managing director and head of internet research at Oppenheimer Co., told Yahoo Finance Live that they purposely made Netflix the easiest service to share and built a huge amount of loyalty from viewing and the shows they have.
He said that investors are too pessimistic about how this will play out, because he said that the crackdown on password sharing could add $2 -- $8 billion in incremental revenue this year.
In addition to the test countries of Chile, Costa Rica, and Peru, Netflix has expanded its crackdown to include countries like Canada, New Zealand, Portugal and Spain. There has not been an announcement regarding the U.S. users.
The password crackdown has forced Netflix to slash prices overseas, which is a concern for investors with shares sinking 7% since the price cut announcement on February 23.
In a note to clients on Thursday, Jason Bazinet, Citi analyst Jason Bazinet, said that the price cuts reflect the pending global enforcement of password sharing. The price of Yemen, Jordan, Iran, Kenya, Croatia, Venezuela, Indonesia, amongst others was slashed by 50% in over 100 overseas markets. The story of Netflix is going to be a little complicated as investors contend with the new Ad tier and concurrent password sharing enforcement, according to Bazinet.
As competition within the streaming space escalates, Netflix's password crackdown and its recently launched ad-supported tier have been seen as meaningful profitability drivers.
Helfstein, who has an outperform rating on the stock and a current price target of $415 a share, cautioned that it is still early days for Netflix's ad tier, but that the company has tools to improve the overall ad experience for consumers.
Netflix should be able to have very targeted ads. As long as ads are targeted and relevant, consumers don't hate them, he said. If they find the ads annoying, they'll pay the extra $3. The stock has gone up about 5% since the beginning of the year.
Alexandra Canal is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter at alliecanal 8193 and email her at alexandra.canalyahoofinance.com.