Netflix Inc. (NASDAQ: NFLX) is testing a new feature that asks customers to verify if they share a household with the account owner, according to a report by Reuters. The new test indicates the company is preparing for a crackdown on password sharing.
What Happened: The streaming service is trying out the new policy with a small number of Netflix users, asking them to sign up for a separate account if they are not living with the subscriber.
In order to continue watching, users are being asked to confirm if they live with the account owner by entering details from a text message or email sent to the account owner, as per the report.
A Netflix spokesperson was quoted by Reuters as saying that the test is designed to help ensure that people using Netflix accounts are authorized to do so. However, the company did not specify whether the verification requirement would be expanded.
Why It Matters: The Netflix terms of service require users of an account to live in the same household. The new feature indicates that Netflix could be trying to crack down on password sharing. Netflix’s standard plan, which costs $13.99 per month, enables users to watch the streaming service on two screens at a time.
Netflix, which added 8.8 million paid net subscribers in the latest quarter, is also facing increasing competition from new streaming services including Walt Disney Co.’s (NYSE: DIS) Disney+ and AT&T Inc.’s (NYSE: T) HBO Max.
Price Action: Netflix closed 3.7% higher on Thursday at $523.06 and further added 0.4% in the after-hours session.