Streaming giant Netflix will begin cracking down on password sharing in the first quarter of this year following the release of the company’s earnings report to shareholders last week.
The practice of sharing passwords with people outside the subscriber’s household will become more complex and will likely incur an additional fee to share a single subscription across multiple locations.
“When we roll out paid sharing, members in many countries will also have the option to pay extra if they want to share Netflix with people they don’t live with. As is the case today, all members will be able to watch as they travel, whether on a TV or a mobile device.”
Based on a trial of the new stricter rules in selected Central and South American countries last year, the company admitted it expected a negative reaction in the short term.
“As we work through this transition — and as some borrowers stop viewing, either because they don’t convert to additional members or full-paying accounts — short-term engagement, as measured by third parties like Nielsen’s The Gauge, could be negatively impacted,” said the statement.
“But we believe the pattern will be similar to what we’ve seen in Latin America, with engagement growing over time as we continue to deliver a great variety of programming and borrowers sign up for their own accounts.”
Netflix hasn’t been more specific than “later in Q1’23” about when the crackdown will begin.
The new model could see Netflix users in Australia, for example, pay around AU$4 extra a month, if last year’s trials in Costa Rica, Chile, Peru, Argentina, El Salvador, Guatemala, Honduras and the Dominican Republic are any guide. These countries were targeted by the company because password sharing appeared to be particularly common there.
Subscribers had no restrictions on mobile devices such as smartphones, tablets or laptops, to allow legitimate users to still access their accounts while traveling.
But the new system could put an end to logging into your account to watch a Netflix show at a friend or relative’s house, as well as sharing a single subscription across multiple houses.
Netflix’s director of product innovation, Chengyi Long, explained in an updated blog post in October how the new system might work. Only one home will be allowed on a single Netflix account, but can be used across multiple devices. Adding additional households will incur an additional monthly fee (in most Latin American countries it was $2.99). While traveling, the account will only be accessible via tablet, laptop or mobile. Subscribers will be able to log in to remove unwanted households from their account.
“Today’s widespread account sharing between households undermines our long-term ability to invest in and improve our service,” she said.
“So we’ve carefully looked at different ways that people who want to share their account can pay a little more.”
In 2022, Netflix lost 200,000 customers in the first quarter alone, and admitted it expected to lose another two million in the second quarter. The company blamed the decline on a number of factors, including increased competition and the war in Ukraine
Long did not outline how Netflix plans to enforce the new system.
In the Latin America trials, if a change in the location of an account used for more than two weeks, the holder receives a notification in the app, giving them the option to change their household address or pay a fee to add the new address .
In an interview with Variety on January 19, Netflix co-CEO Greg Peters admitted that the crackdown on shared passwords “would not be a universally popular move” and that the company would begin enforcing the new regime by giving customers who continues to share accounts, “a gentle nudge” to pay extra for multi-household use.
In the report to shareholders the same day, Netflix reported a total of 231 million paid memberships by 2022, $32 billion generated in revenue and $5.6 billion generated in operating income.
Netflix Australia declined to comment, saying last week’s shareholder communication on the issue was the most up-to-date.