Coming soon: Netflix and chill-on-sharing-your-password.
Netflix NFLX, -0.27% once pivoted from being a DVD delivery company to becoming a video streaming giant. And more changes are on the way for the streaming service as it faces growing competition from rivals like HBO Max WBD, -3.14% and Disney+ DIS, -2.21%.
Now, Netflix is shifting from seemingly encouraging users to share their account passwords — such as tweeting “Love is sharing a password” six years ago — to cracking down on those who share their Netflix accounts.
Netflix had 230.75 million subscribers worldwide at the end of the fourth quarter, but the company believes another 100 million people are using Netflix via shared login information.
So, in an effort to begin to monetize those viewers, Netflix has introduced a variety of measures to stop people from sharing their passwords — or at least make some money off those who do — beginning in Chile, Costa Rica and Peru.
Netflix has instituted new password-sharing rules in these three countries after testing the measures throughout 2022. While it has not begun implementing any of these rules in the U.S. — yet — the company said during its most recent earnings announcement that it will start cracking down on password sharing “more broadly” in other countries by March 31.
What are the new rules?
In Chile, Costa Rica and Peru, Netflix account holders must choose a primary address, and subsequently verify that location once a month.
“To ensure that your devices are associated with your primary location, connect to the Wi-Fi at your primary location, open the Netflix app or website, and watch something at least once every 31 days,” reads Netflix’s FAQ page.
This should ensure that people who live outside of the account holder’s primary address can’t use the account holder’s Netflix login information to stream from somewhere else. But people who have standard or premium Netflix subscriptions have the option to add an extra member to their account for a monthly fee of $2.99, which may vary based on a country’s currency.
The streaming giant will be able to verify the main account holder through an IP address (aka the series of numbers that identify any device on a network), and not geographical location, a Netflix spokesperson told MarketWatch. That’s in part because enforcement based on the geographical location of the main account would run into problems if a user attempted to use their own Netflix account while away from home on a mobile device, like a phone or laptop.
So what if you’re traveling and want to use your account in a different location?
If a Netflix account holder wants to log in on a device that isn’t associated with the account’s primary address, they can, but only temporarily. Account holders can request a temporary code that lasts for 7 consecutive days that will allow them to view Netflix on a device not associated with their normal address.
Other login attempts from people outside the primary address “may be blocked from watching Netflix,” the company’s website reads.
Netflix would not share specifics about its plan to curb U.S. password sharing with MarketWatch, such as whether it would consider implementing any of these new password-sharing features used in Chile, Costa Rica and Peru, saying it requires a “nuanced” approach. But a spokesperson noted that, “we’ve done it in the other three countries, of course we are going to take specific learnings from those three countries and apply it to other countries.”
And while the U.S. Netflix terms of service currently indicates that an account “may not be shared with individuals beyond your household,” the company admitted to MarketWatch that it doesn’t really enforce the policy outside of bad actors who have tried to exploit the service by reselling login information, for example.
Right now in the U.S., one Netflix account can have up to five profiles on it regardless of membership tier; these are used to differentiate content suggestions and watchlists between profiles, as well as to give parents the ability to add maturity level restrictions for kids’ accounts.
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Netflix co-Chief Executive Greg Peters said during the company’s latest earnings call that the upcoming crackdown on password sharing is to “nudge” users who are viewing Netflix to ultimately pay for it. “We understand this will not be a universally liked decision, similar to raised prices that lead to churn for a period of time,” Peters added.
Netflix now has four monthly subscription options: basic with ads ($6.99), basic ($9.99), standard ($15.49) and premium ($19.99). And for all four service tiers in the U.S., an unlimited number of devices can be used to log in under a single account — but only a certain number of users can be concurrently streaming the service under a single account at once, a Netflix representative told MarketWatch. The amount of allowed concurrent streams varies by plan, such as two screens streaming at the same time on the standard plan, or up to four screens streaming at once under the premium plan.
Netflix debuted its ad-supported plan last November to compete in the streaming wars with brands like Disney+ , Apple TV+ AAPL, +2.44% and HBO Max.
Streaming continues to get more expensive in some areas, which has pushed many consumers to take stock of just how much money they are spending on streaming services each month, and leading analysts to wonder whether we have reached peak streaming.
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Some news outlets this week reported that Netflix has already rolled out its new rules to end password sharing in the U.S., but Netflix told MarketWatch that these restrictions are currently only for Chile, Peru and Costa Rica.
“Nothing has changed so far for the U.S. — nothing,” the spokesperson said.