Netflix Starts Cracking Down Harder On Password Sharing
Back when Netflix was a pesky upstart trying to claw subscribers away from entrenched cable providers, the company had a pretty lax approach to users who shared streaming passwords. At one point CEO Reed Hastings went so far as to say he loved" password sharing, seeing it as akin to free advertising. The idea was that as kids or friends got on more stable footing (left home to job hunt, whatever), they'd inevitably get hooked on the service and purchase their own subscription.
But as Netflix subscription numbers have begun to go south and competitors are challenging Netflix's market share and revenue, the company is predictably taking a harder stance on the practice.
In a blog post, Netflix director of product innovation Chengyi Long explained that the company is conducting a new test that will impose additional fees on an account holder if Netflix can see that the account is being used outside of the account owner's home. The trial is initially only being conducted in Chile, Costa Rica, and Peru, and is, predictably, framed by Netflix as an innovative change:
...accounts are being shared between households - impacting our ability to invest in great new TV and films for our members. So for the last year we've been working on ways to enable members who share outside their household to do so easily and securely, while also paying a bit more.
Basically, original account holders whose passwords are being shared outside of the home will pay 2,380 CLP in Chile, $2.99 USD in Costa Rica, and 7.9 PEN in Peru per each user. Netflix is also creating systems that will make it easier for password sharing users to migrate their shared account to a new subscription.
Netflix doesn't state how it's determining whether a password user lives in the house. Presumably it's by IP addresses, MAC IDs, or some other identifying metric. So it's not yet clear whether this is something that can be bypassed by utilizing a VPN or other IP address masking technology.
Again though, executives have, for years, noted that password sharing isn't actually a big deal. Execs at HBO (at least before the AT&T acquisition) repeatedly noted that it doesn't really hurt these companies' bottom lines in part because, much like with traditional piracy, there's no guarantee these users would actually subscribe if they lost access.
Most streaming services already impose limits to how many streams can be running simultaneously under one account anyway, forcing you to pay more money for accounts with greater simultaneous streaming limitations. So it's not like passwords could be shared with an unlimited number of followers, or this was having a profound impact on Netflix's bottom line - already buoyed by a recent price hike.
But as competition gets more heated in the streaming space it's both hurting market share and forcing companies to spend top dollar for content creation. So companies like Netflix, well out of the honeymoon stage, are now going to be looking to wring more money from each existing subscriber in any way possible, a trend that's only going to accelerate.