How Netflix’s password-sharing crackdown is likely to work

Netflix This week surprised the world. He said he plans to finally deal with the rampant practice of password sharing.

Over 100 million households use shared passwords. Netflix said on TuesdayIncluding 30 million people in the United States and Canada.

However, video streamers do not plan to simply freeze those shared accounts. Instead, companies will prefer to set additional charges for those accounts used by multiple people outside the home.

Netflix’s plan to capture lost revenue begins with an alert being sent to the account owner whose password is being used by another household.

The company has We have already started testing this feature In Peru, Costa Rica and Chile. For accounts that share passwords between addresses, Netflix will charge an additional fee to add up to two “sub-accounts” outside the home. Prices vary from country to country. Based on current exchange rates, it’s about $ 2.13 per month in Peru, $ 2.99 in Costa Rica, and $ 2.92 in Chile.

The company also allows people who use shared passwords to transfer their personalized profile information to new accounts or sub-accounts, allowing them to retain browsing history and recommendations.

“If you have sisters, for example, if you live in another city, you want to share Netflix with her, that’s great,” said Greg Peters, chief operating officer at the company’s conference call. “We are not trying to stop that sharing, but please pay a little more so that we can share it with her and that she can benefit and value the service. , We also make money related to that viewing. “

Netflix hasn’t said how much revenue can be expected from implementing a sharing strategy around the world, but Peters believes it will take about a year to use sub-account pricing worldwide. I am.

Survey from research agency Time2Play Proposed about 80% of Americans People who use someone else’s password cannot get their new account unless they can share the password. We did not investigate how many current account payers are willing to pay more to share with others.

Peters also suggested that the company could fine-tune prices and further review its testing strategy.

“It will take some time to resolve this and get the balance right,” he said. “And to set your expectations, I believe we’ll be iterating and deploying for a year or so to launch the solution globally, including markets like the United States.”

Netflix’s plans are unprecedented. So far, major streamers have never cracked down on password sharing.Other owners of streaming services, etc. Disney, Warner Bros. Discovery, ComcastWith NBC Universal Paramount GlobalMay not make its own plans until they consider Netflix’s password sharing reforms.

Some account owners will definitely be surprised when they receive news from Netflix that their passwords are shared. Also, if the owner of the primary account chooses not to pay extra, it’s unclear how long Netflix will be able to maintain access for people watching on shared accounts.

In addition, Netflix needs to take the definition of a password sharer lightly to avoid accidentally tagging people as abusers, such as families who live temporarily away from home.

If you don’t want to act on this user group, it will save millions of people from the Netflix crackdown, at least in the first place.

“They will start with a series of abusers,” said Rich Greenfield, media analyst at Lightshed Partners. “If you have 15 accounts, it’s very easy.”

The company may also not want to involve employees in the debate over what is classified as a home account and what is eligible as a sub-account.Disputing these definitions has hit Netflix so far Best-in-class brand.

But “Netflix knows who you are,” Greenfield said, regardless of whether you’re using your own personalized profile.

Five years ago, Netflix actually encouraged password sharing. The company’s philosophy at the time was simply to focus more on content. This creates a buzz and can lead to a real subscription. The strategy seems to have paid off. Netflix subscriptions are increasing every quarter for over 10 years — Until the previous quarter.

In 2017, Netflix’s corporate account tweeted, “Love shares passwords.”

Well, if you stop doing that, the company will love it.

Disclosure: Comcast’s NBC Universal is CNBC’s parent company.

See: Netflix tests password sharing surcharges