Netflix Warns Crackdown on Password-Sharing Will Expand, Says It ‘Undermines’ Business

Netflix has warned customers that it is expanding its crackdown on accounts that share their passwords with friends and family.

The streaming company issued a notice to Netflix customers about accounts that are sharing passwords between several households.

The warning comes as Netflix it rolls out paid sharing “more broadly” during the first quarter of 2023.

In a letter (pdf) dated Thursday, the Los Gatos, California-based streaming service said that widespread account sharing is undermining its business.

Netflix argues that the practice stunts its ability to invest in the company.

The company says it will now intensify its bid to combat password-sharing.

“Today’s widespread account sharing (100M+ households) undermines our long-term ability to invest in and improve Netflix, as well as build our business,” the letter to shareholders reads.

“While our terms of use limit use of Netflix to a household, we recognize this is a change for members who share their account more broadly.”

The company said that it has opted to “build additional new features that improve the Netflix experience, including the ability for members to review which devices are using their account and to transfer a profile to a new account.”

And, it added, “members in many countries will also have the option to pay extra if they want to share Netflix with people they don’t live with” in the future.

Netflix has already rolled out the changes in countries like Argentina and Honduras.

If the program is rolled out worldwide, Netflix may charge around $6.99 for account sharing in the United States, according to a report from the Wall Street Journal in December.

The firm previously said that it would enforce password-sharing rules by checking device IDs, account activity, and IP addresses.

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Last year, when Netflix announced plans to crack down on password sharing, it didn’t provide a clear date for when it would start.

“This will not be a universally popular move,” Netflix co-CEO Greg Peters told the New York Observer.

Netflix expects some users to cancel their subscriptions because of it, said Greg Peters, who replaced Reed Hastings as co-CEO alongside Ted Sarandos as of Jan. 19.

But it might also boost the total subscriber numbers, according to Horowitz Research, a New York-based research firm.

But in the letter, Netflix made reference to testing in Latin America, which showed engagement increasing on the platform as people who received passwords from others signed up for their own accounts.

Netflix lost customers in the first half of 2022.

It returned to growth in the second half.

Last year, the streaming service drew considerable backlash for what critics say are attempts to censor differing viewpoints and pursue a left-wing agenda.

But in 2022, the firm issued a lengthy memo to employees saying that its “viewers decide what’s appropriate for them, versus having Netflix censor specific artists or voices.”

The memo then suggested that employees who don’t like it can leave, as Slay News reported.

“Depending on your role, you may need to work on titles you perceive to be harmful,” it said, coming after some employees protested comedian Dave Chappelle’s Netflix stand-up special.

“If you’d find it hard to support our content breadth, Netflix may not be the best place for you.”

Netflix this week also announced that CEO Reed Hastings would step down after spending 25 years as the company’s chief executive.

Ted Sarandos and Greg Peters were named as co-CEOs of Netflix, and Hastings will stay as executive chairman.

“This was my road to Damascus experience, a turning point in my understanding of the role of talent density in organizations,” Hastings wrote.

“The lessons we learned became the foundation of much that has led to Netflix’s success.”

Hastings said in a blog post that the two had complementary skill sets of understanding entertainment and technology and that the company would grow faster with them as co-CEOs.

Peters said on Thursday that the pair planned to forge ahead using Hastings’s playbook and had no major changes to announce.

“There’s no big strategy shifts or big culture shifts,” he said in a post-earnings video interview with an analyst.

Veteran media analyst Richard Greenfield of LightShed Ventures said Hastings, whose company upended Hollywood’s conventions, had bested the entertainment industry once again—in terms of managing succession.

“Most media companies have done a relatively poor job of management transition,” said Greenfield.

“This appears to be Reed creating a very elegant approach to management transition.”

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By Nick R. Hamilton

Nick has a broad background in journalism, business, and technology. He covers news on cryptocurrency, traditional assets, and economic markets.

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