Netflix Seeks to Limit Password Sharing in US

Netflix Seeks to Limit Password Sharing in US
The Netflix screen on a television in Pittsburgh on Oct. 17, 2022. (Gene J. Puskar/AP Photo)
Naveen Athrappully

Streaming giant Netflix is cracking down on the practice of subscribers sharing passwords with non-household members in the United States.

“Your Netflix account is for you and the people you live with—your household,” the company said in an email posted to a blog on May 23. Netflix gives two options for subscribers looking to share the streaming service: transferring the account to a new membership or paying $7.99 per month for an extra member.

Netflix’s decision comes as the company blamed password sharing for negatively affecting its business. In a January letter to shareholders, Netflix claimed that “widespread account sharing (100M+ households) undermines our long term ability to invest in and improve Netflix, as well as build our business.”

According to Netflix’s pricing plans for the United States, the $15.49 per month Standard plan allows subscribers to add one extra member who does not live with them.

The higher Premium plan, costing $19.99 per month, allows two extra members. The Basic and “Standard With Ads” plans do not list any ability to add extras.

The 100 million-plus households that share accounts make up roughly 43 percent of the streaming giant’s global user base.

Tapping Into Non-Paying Users

In a letter (pdf) to shareholders in April last year, Netflix called the 100 million-plus households using passwords from other households a massive business opportunity.

“This is a big opportunity as these households are already watching Netflix and enjoying our service. Sharing likely helped fuel our growth by getting more people using and enjoying Netflix.” Though the company may not be able to monetize all of this potential, it does present a “large short to mid-term opportunity.”

The company kicked off its “paid sharing” option in 12 countries in February, with the option coming now to the United States.

UBS media analyst John Hodulik earlier said that the password-sharing crackdown could fuel Netflix’s advertising business as password “sharers” opt for lower-priced plans that come with ads. By the end of this year’s first quarter, Netflix had 231 million paid memberships globally.

Netflix has said that its subscriber growth was affected in nations where it rolled out such initiatives in the first quarter. In Latin America, there was a spate of cancellations after Netflix introduced extra payments for non-household members.

However, the streaming platform discovered that people who used to borrow passwords would later activate their accounts, which drove up revenue.

Performance Below Expectations

Netflix’s crackdown on password sharing comes as the company’s financial performance failed to meet expectations. Though revenue and earnings for the first quarter were roughly in line with analyst estimates, the streaming platform’s subscriber growth disappointed investors.

Between January and March, Netflix only added 1.75 million subscribers, missing analyst expectations of 2.06 million additions.

During the first quarter of 2022, the company had lost 200,000 subscribers, its first decline in subscriber base in over a decade.

For the entirety of 2022, Netflix added almost 9 million subscribers, which is only half of the 18 million it had added in the previous year. Since much of the growth came from nations in Asia and Latin America, the revenue per average user is said to have been impacted.

Netflix is also taking action to make itself more tolerant of diverse viewpoints. Last year, the platform was criticized for allegedly pursuing a left-wing agenda and censoring varying opinions.

The company then issued a memo reminding employees that it is up to viewers to decide “what’s appropriate for them, versus having Netflix censor specific artists or voices.” It told employees who may not be comfortable with this stance that “Netflix may not be the best place for you.”

The memo came after some employees had protested Netflix’s decision to host a stand-up special featuring popular comedian Dave Chappelle.

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