The days of password sharing may be coming to an end at Netflix. In 2022, the streaming giant said it was testing a way to crack down on password sharing in Chile, Costa Rica, and Peru. This would involve prompting subscribers to pay more per month to share their accounts. Then in February 2023, Netflix began expanding the crackdown to four more countries: Canada, New Zealand, Portugal, and Spain. It has not yet come to the United States, and Netflix chief product officer Greg Peters said the rollout will be staggered "as we work through sets of countries."
How will the password-sharing crackdown work? Here's what we know:
How common is password sharing?
Netflix's terms of service say a user's account "may not be shared with individuals beyond [their] household." But many subscribers do just that, and according to Netflix, the result is that more than 100 million households don't pay for the service. The company didn't seem to care about this for years — and at times, even encouraged account sharing. "Love is sharing a password," Netflix once famously declared on Twitter.
But this attitude has come to an end. Netflix chief product officer Greg Peters said in April 2022 the company is "not trying to shut down" account sharing completely, but it's looking for ways to make money off these viewers who aren't paying anything.
How is Netflix planning to enforce the crackdown?
In one test, Netflix users were able to add "sub accounts" for up to two people who don't live with them. Their subscription fee would go up, though the total would come out to less than if those two people both signed up for their own separate Netflix accounts. "An extra member will have their own account and password, but their extra member slot will be paid for by the person who invited them to join their Netflix," the company explained.
When this was rolled out in several countries including Canada in February 2023, sub accounts could only be added for users on the standard or premium subscription tier, not the "basic" or "basic with ads" tiers. Those on the standard tier could also only add one sub account, while premium tier subscribers could add two.
Alternatively, users watching on someone else's account will be able to transfer their profile to a new account while keeping their viewing history, list, and recommendations. Netflix has also tested asking users to enter a verification code sent to the owner of an account to continue watching — something that could, for instance, affect those using the account of someone they aren't necessarily in regular contact with.
According to The Wall Street Journal, Netflix is considering a plan for the U.S. similar to what it tested in Latin America, where password borrowers would continue getting prompted to enter a verification code sent to the owner of the account until that owner pays more.
In late January 2023, Netflix faced significant backlash after The Streamable reported a help center page had been updated with details on how the password sharing rules would be enforced. According to this page, it would involve requiring users to "connect to the Wi-Fi at your primary location, open the Netflix app or website, and watch something at least once every 31 days" to continue having access to the service on that device.
This page also indicated Netflix planned to block access to those who try to sign in to devices at other locations, a much stricter means of enforcement than expected. "When someone signs into your account from a device that is not part of your primary location, that device may be blocked from watching Netflix." But Netflix subsequently said this information was "only applicable to Chile, Costa Rica, and Peru" and went live in other countries by mistake. It has since been removed.
How much more will subscribers be asked to pay?
Netflix hasn't announced what the pricing will look like for U.S. subscribers. But when expanding the new rules to Canada, for example, Netflix said a "sub account" would cost "$7.99 a month per person," the equivalent of roughly $5.99 in the U.S. This was more expensive than expected based on what Netflix had previously tested.
According to The Wall Street Journal, Netflix has discussed charging account sharers an amount "only slightly below" the $6.99 monthly fee of its ad-supported subscription tier.
Does this mean I won't be able to watch Netflix while traveling?
In a shareholder letter, Netflix clarified that "all members will be able to watch while traveling, whether on a TV or mobile device," even after the password-sharing crackdown is rolled out. Also, when Netflix ran a test cracking down on password sharing in five Latin American countries, streaming on mobile devices, tablets, or laptops wasn't affected, Bloomberg reports.
"Members can still easily watch Netflix on their personal devices or log into a new TV, like at a hotel or holiday rental," Netflix said in February 2023.
Why is Netflix doing this?
Netflix announced its plan to crack down on password sharing in April 2022 after it lost subscribers for the first time in over a decade — 200,000 of them. The company said this could partially be blamed on losses from suspending service in Russia amid the war in Ukraine. But the earnings report still stunned analysts, as Netflix had projected it would gain 2.5 million subscribers that quarter, so the company's stock took a dive.
Seeking to quickly assure shareholders it was taking action to boost revenue, Netflix said it was working on "more effective monetization of multi-household sharing." Since then, Netflix has bounced back somewhat and returned to adding subscribers. But the company remains focused on growing revenue, emphasizing this as its most important metric over even subscriber growth.
Netflix's other plan for growing revenue was introducing a new ad-supported subscription tier, which launched in Nov. 2022 for $6.99 per month. But this tier reportedly had a slow start.
Will the crackdown work?
Some analysts "see an influx of several billion dollars in new revenue" if Netflix can successfully roll out its password crackdown, Deadline reports. In January 2023, Netflix said that between "launching paid sharing and building our ads offering," "we believe we have a clear path to reaccelerate our revenue growth."
Netflix has admitted, though, that some users will likely cancel their accounts rather than pay more. "From our experience in Latin America, we expect some cancel reaction in each market when we roll out paid sharing, which impacts near term member growth," the company said. But Netflix told shareholders that "as borrower households begin to activate their own standalone accounts and extra member accounts are added, we expect to see improved overall revenue."
Updated Feb. 10, 2023: This story has been updated with the most recent developments.
