When will Netflix crack down on password sharing?

Netflix is ​​treading uncharted territory as it tries to turn password sharers into paying customers.

After a historically rough quarter in which the streaming giant lost 200,000 subscribers – and predicted 2 million more would be lost in the coming quarter – the company says it will crack down on users who share their accounts with people outside the home. The company has been testing “Extra Member” plans in Chile, Costa Rica and Peru, and it now plans to bring similar initiatives to other countries in the coming year.

Until now, every major on-demand streaming service has relied on softer mechanisms to minimize password sharing. While one service may limit the number of devices that can stream at the same time, no other services have attempted to block outdoor access and sell password sharers on paid plans.

In doing so, Netflix will have to navigate through all sorts of thorny issues around access control and pricing that didn’t exist in the streaming TV world before. Getting it wrong can put off existing customers and not generate meaningful revenue.

If Netflix wants to take password sharing seriously, here are all the questions it needs to answer first:

How does Netflix prevent password sharing?

Netflix has not gone into details about how it will enforce its password-sharing crackdown in major markets, as US TechCrunch’s Sarah Perez reports that Netflix will “use IP address, device IDs and other information” to determine whether there is permanent division. outside the account holder’s home, but it’s unclear how much remote access would trigger a response from Netflix.

We also don’t know what that reaction will look like. Is the login process getting more cumbersome for password sharers, with more automatic logouts or two-factor authentication prompts? Would Netflix ever try to block users of the service outright? If the enforcement measures are light enough, the alleged action could end up looking more like a fishing expedition.

How does Netflix differentiate password sharing from travel?

Comparing the account holder’s IP address and device IDs to remote users makes sense as a basic enforcement measure, but it also raises the question of how Netflix will accommodate travel. Would a two-week AirBnB vacation be enough to set off Netflix’s password-sharing alarms? Do users with summer or winter homes need additional accounts? And what happens if you move? Does Netflix offer a way to update your home address, as some live TV streaming services do now?

Stricter enforcement of password sharing brings a lot of messy edge cases and potential to annoy legitimate account holders. It’s unclear how Netflix will handle these situations.

How much does Netflix password sharing cost?

In Costa Rica, Chile and Peru, Netflix has tested an “Extra Member” subscription at prices ranging from about $2 to $3 per month. Those subscriptions allow up to two people to access an existing Netflix account with their own logins and profiles. The company also offers a profile migration tool for password sharers who decide to pay for their own account.

But Netflix hasn’t said what password-sharing plans will cost outside those countries, including the US market, where subscriptions are more expensive. Setting prices too low can only encourage people currently paying full price to switch to the new cheaper option, a counterproductive end result from Netflix’s point of view. And if set too high, it can drive customers away. It is again a difficult balance that the company will have to find.

When will the crackdown begin in earnest?

Sharing your Netflix password doesn’t get any harder right away. During the company’s latest earnings call, COO Greg Peters addressed the challenges that tougher enforcement could pose, noting that it “would take a while to work this out and get that balance right.” He added that Netflix would “repeat a year or so” before deploying its countermeasures.

That leaves a lot of wiggle room for timing, and we can see the company testing different approaches and pricing in different markets before moving on to something concrete.

How will other streamers react?

This last question is not for Netflix, but for its competitors. As a whole, the streaming industry has long resisted draconian attacks on password sharing because of the many potential problems involved, and Netflix itself once seemed content with password sharing as a streaming business reality.

If Netflix can show a revenue increase through a tougher stance on password sharing, other streaming services like Disney+, HBO Max and Paramount+ could follow suit. After all, they may end up encountering the same market saturation and subscriber growth issues that Netflix is ​​now facing.

On the other hand, if the crackdown doesn’t move the needle, or it triggers a widespread response from customers struggling to access the service they paid for, other companies could use their lenient stance as a competitive advantage.

The one thing we know for sure about Netflix’s crackdown on password sharing is that the streaming world will be watching closely to see how it plays out.

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