Netflix has finally taken action against password sharing. Here's how it'll most likely go.

  • To make up for lost revenue, Netflix proposes to charge primary account users an additional fee for each "sub account," or password sharer.
  • The new pricing plan from the video streaming service could take up to a year to spread out globally.
  • Netflix's strategy is unprecedented, and it raises a number of problems.

This week, Netflix shocked the globe by announcing that it will finally confront the widespread practise of password sharing.

Netflix claimed Tuesday that more than 100 million households, including 30 million in the United States and Canada, use a shared password.

However, the video streaming service does not intend to just disable those shared accounts. Instead, the corporation is more likely to charge an additional price for accounts that are used by many persons outside of the home.

Netflix's strategy for recouping lost money would begin with an alert emailed to account holders whose passwords have been shared with other households.

In Peru, Costa Rica, and Chile, the corporation has already begun testing this feature. Netflix is charging an extra cost to add "sub accounts" for up to two persons outside the home for accounts that share a password across addresses. Based on current exchange rates, the price varies by country: $2.13 a month in Peru, $2.99 in Costa Rica, and $2.92 in Chile.

The company also allows people who share a password can also transfer their personalised profile information to a new account or a sub account, letting them to maintain their viewing history and recommendations.

"If you have a sister who lives in another city and you want to share Netflix with her, that's terrific," said Chief Operating Officer Greg Peters during the company's earnings call. "We're not trying to stop you from sharing with her, but we're going to ask you to pay a little more so that she receives the benefit and value of the service, and we get the income connected with that viewing."

Netflix didn't disclose how much money it hopes to make from its global sharing approach, but Peters estimated that it would take approximately a year to implement its sub account pricing everywhere.

A survey from research organization Time2Play suggested nearly 80% of Americans who use someone else's password would not create a new account if they couldn't share the password. It didn't ask how many existing account holders would pay more to share their money with others.

Peters also hinted that the corporation might modify its pricing or rethink its testing technique.

"It'll take a long to figure this out and strike the correct balance," he said. "And so, just to frame your expectations, my assumption is that we'll iterate for a year or two before deploying everything so that we can offer that solution globally, including places like the United States."

Netflix's strategy is unique. No big streamer has ever taken action against password sharing. Other streaming service owners, such as Disney, Warner Bros. Discovery, Comcast's NBCUniversal, and Paramount Global, are likely to wait until Netflix's password-sharing rules are reviewed before making their own decisions.

When Netflix informs account subscribers that their credentials have been shared, they will likely be astonished. It's also unclear how long others watching on a shared Netflix account will have access if the primary account user refuses to pay the extra cost.

Furthermore, Netflix will have to tread carefully when categorising password sharers to prevent incorrectly labelling people as abusers, such as family members who are temporarily gone from home.

Millions of consumers would be saved from Netflix's crackdown if the company refused to move against this category of customers – at least for the time being.

"They'll start with repeat abusers," said Rich Greenfield of LightShed Partners, a media analyst. "It's really simple if you have 15 individuals utilising your account."

The corporation also doesn't want its employees squabbling about what constitutes a home account and what qualifies as a sub account. Contesting those standards might be a thorny issue for both employees and customers, who have viewed Netflix as a best-in-class brand up until now.

"Netflix knows who you are," Greenfield said, whether or not you use your own unique profile.

Netflix actually encouraged password sharing five years ago. At the time, the company's thinking was that it just wanted more eyes on its material, which would generate buzz and eventually lead to actual subscriptions. That method appeared to be successful. Until last year, Netflix subscribers had been increasing every quarter for more than ten years.

"Love is sharing a password," Netflix's corporate account tweeted in 2017.

Now, the company would appreciate it if you stopped.