How does the Netflix password crackdown work?


Netflix users have been warned. The great password crackdown that has been rumoured for months is almost upon us.
Netflix Golden Globe and Critics Choice Nominee Toast

Netflix co-CEO Ted Sarandos speaks at a Netflix event in January.

The streaming giant, which previously encouraged password sharing has since clarified its position, stating it is not happy with the 100 million households who are sharing accounts.

While releasing first quarter earnings, the company said it wanted to implement some improvements to the plan, which it refers to as paid sharing, allowing subscribers to add other users to the account for a smaller fee than signing up for their own accounts.

“Paid sharing is another important initiative as widespread account sharing in [more than 100 million households] undermines our ability to invest in and improve Netflix for our paying members, as well as build our business,” Netflix first quarter 2023 shareholder letter said.

The service began cracking down on passwords in Canada, New Zealand, Spain and Portugal in first quarter, building on an approach rolled out initially last year in Latin America.

In short, if you’ve been mooching off your mum and dad’s account, your luck is about to run out within the next two months. While Netflix hasn’t set the exact date or fee for the Australian password crackdown just yet, it will take place before June.

How does the crackdown work?

If a user does not set a primary location, Netflix will use the IP address and device ID and automatically set it up.

If users want to add an extra member “sub account” for up to two people they don’t live with, they can do so for an additional fee—CAD$7.99 a month per person in Canada, NZD$7.99 in New Zealand, Euro 3.99 in Portugal, and Euro 5.99 in Spain.

Users will also be able to transfer a profile to a new account to keep their watch history and saved list.

Users will still be able to watch Netflix from their personal devices or log into new TV’s at hotels or other locations by using one-time access codes, the company said.

Image: Getty
How has the crackdown been received?

“We’re pleased with the results of our Q1 launches in Canada, New Zealand, Spain and Portugal, strengthening our confidence that we have the right approach,” Netflix said in an investor letter.

“With each launch, we learn more about how best to roll out these changes and what matters to members the most, in particular maintaining travel/watching on the go and the ability for people to better control access to their accounts as well as transfer profiles to separate accounts,” the letter continued.

“We could have launched broadly in late Q1, but we found enough improvement opportunities in these areas to shift a broad launch to Q2 to implement those changes.”

1.75 million new subscribers

Netflix added 1.75 million subscribers during the first three months of 2023, according to the release, growing to 232.5 million global paid subscribers.

That tops average analyst estimates of 232 million subscribers, according to FactSet, but marks a 77% decrease from the nearly eight million subscribers added during the prior quarter.

Shares of the streaming giant tanked as much as 10% in after-hours trading, recovering to a more modest 4% loss by 4:30 p.m.

Netflix’s newly released guidance for the second quarter for $2.84 earnings per share fell far short of Street estimates of $3.07, while it declined to provide guidance for subscriber expectations for the first time.

Still, it marks the company’s third straight quarter of subscriber growth after it notched consecutive declines in the first two quarters of last year, the first user losses in over a decade—which sent its stock spiraling.

Netflix posted $1.31 billion in profit last quarter, narrowly exceeding analyst estimates of $1.3 billion, while its $8.16 billion in revenue disappointed analyst expectations of $8.18 billion.

More from Forbes Australia

Issue 4 of Forbes Australia is out now.