Netflix (NASDAQ:NFLX) may be showing signs of saturation in the United States, but there's a good reason it can slowly and steadily add millions of new subscribers over the next decade and a half or so.

Bernstein analyst Todd Juenger points out in a recent note to investors that Netflix's penetration rate among consumers aged 65 and older was a paltry 22%. That compares to 82% of 18- to 49-year-olds. He says the opportunity to increase adoption among older households could translate into 23 million new subscribers in the U.S. and Canada over the next 15 years.

A family in a living room watching TV.

Image source: Netflix.

The next era of entertainment

In Netflix's long-term view, the company sees streaming entertainment as the next step in the lineage of home entertainment following radio and television. "The new era of streaming entertainment, which began in the mid-2000's, is likely to be very big and enduring," management wrote. Just as linear television had a 60-year run as the premier source of home entertainment, management sees the same for streaming video.

And Netflix has positioned itself to remain a key piece of streaming for years to come. It offers one of the best values in entertainment based on its sizable and acclaimed content library. That content catalog is supported by its massive subscriber base pumping in more revenue to fuel its spending. And it has an excellent track record of execution in production and promotion of its original series.

All this is to say: Netflix is the new normal for home entertainment. We're quickly approaching the point where the number of U.S. households that have a Netflix subscription exceeds those that have a cable TV subscription.

Where those 23 million new subscribers are coming from

As the population ages, investors can expect young people establishing their own households to subscribe to Netflix (and probably never subscribe to cable). Meanwhile, it's unlikely existing subscribers will cancel their service as they age. And on top of that, Netflix is finding ways to sign up late adopters through bundled offerings and billing integration with existing services, including traditional linear TV.

There are already signs Netflix's efforts to attract and engage older consumers are working. Juenger cites Nielsen data showing Netflix viewing hours among consumers 55 and older is growing twice as fast as the general population.

Netflix's long-term view says it expects to reach between 60 million and 90 million households in the U.S. Adding 23 million more subscribers will put it right around the top of that range. It currently has about 73 million subscribers in the U.S. and Canada.

It's just a matter of time

Netflix is at the forefront of the next era of home entertainment. While it now faces competition from traditional media companies entering the streaming industry, they don't pose a long-term threat to Netflix's subscriber growth. Management has likened competition to the idea of how cable TV networks didn't kill off the broadcast channels. In fact, the number of networks expanded over time as the cable subscriber base grew, and there were lots of winners in the industry. 

As such, it may be just a matter of time before Netflix reaches subscriber levels comparable with what cable TV saw at its peak, perhaps higher. The company can do some things to make adoption easier for some with bundling or simpler billing, pulling forward subscribers. But as cord-cutting accelerates and proliferates over the next couple decades, Netflix will continue to add a steady drip of subscribers from older households joining the platform a bit late.

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