Streaming giant Netflix will begin cracking down on password sharing in the first quarter of this year after the company released its earnings report to shareholders last week.
The practice of sharing passwords with people outside of the subscriber’s household is becoming more complex and will likely require an additional fee to share a single subscription across multiple locations.
“While our Terms of Service limit Netflix usage to one household, we recognize that this is a change for members who share their accounts more broadly,” Netflix said in its report to shareholders.
“With the introduction of 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 can watch TV on the go, whether on a TV or mobile device.”
Based on a testing of the new stricter rules in select Central and South American countries last year, the company acknowledged that it expects a negative reaction in the short term.
“As we work through this transition — and some borrowers stop watching because they either don’t convert to additional members or full-paying accounts — short-term exposure, as measured by third parties such as Nielsen’s The Gauge, could be negatively impacted,” the statement said .
“However, we believe the pattern will be similar to what we have seen in Latin America, with engagement increasing over time as we continue to offer a wide variety of programs and borrowers sign up for their own accounts.”
Netflix was no more specific than “later in Q1 ’23” when the crackdown will begin.
The new model could see Australian Netflix users paying about an extra $4 a month, judging by last year’s trials in Costa Rica, Chile, Peru, Argentina, El Salvador, Guatemala, Honduras and the Dominican Republic . These countries were targeted by the company because password sharing seemed to be particularly common there.
No mobile device restrictions such as smartphones, tablets or laptops have been imposed on subscribers to allow legitimate users to access their accounts while on the go.
But the new system may 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 homes.
Chengyi Long, director of product innovation at Netflix, explained how the new system might work in an updated blog post in October. Only one Home is allowed on a single Netflix account, but it can be used on multiple devices. Adding more households incurs an additional monthly fee (it was $2.99 in most Latin American countries). When traveling, the account is only accessible via tablet, laptop or mobile phone. Subscribers can opt-in to remove unwanted households from their account.
“The widespread use of account sharing between households today is undermining our long-term ability to invest in and improve our service,” she said.
“So we carefully researched different ways for people who want to share their account to pay a little more.”
In 2022, Netflix lost 200,000 customers in the first quarter alone and admitted to losing another two million in the second quarter. The company blamed a number of factors for the decline, including increased competition and the war in Ukraine
Long didn’t detail how Netflix plans to enforce the new system.
If the Latin American Studies detect a change in the location of an account used for more than two weeks, the holder will receive an in-app notification giving them the option to change their household address or pay a fee to have the add new address .
In a Jan. 19 interview with Variety, Netflix co-CEO Greg Peters admitted that the crackdown on shared passwords “would not be a universally popular move” and the company would begin enforcing the new regime by it gives customers who continue to share accounts “a gentle nudge” to pay extra for multi-household use.
In the report to shareholders on the same day, Netflix reported a total of 231 million paid memberships in 2022, $32 billion in revenue and $5.6 billion in operating income.
Netflix Australia declined to comment, saying last week’s shareholder communications on the matter were the most recent.