Netflix Expands Password Sharing Crackdown Around the World

A little less than a year after announcing it would crack down on password sharing, Netflix is now officially doing so. The streaming video pioneer on Tuesday began sending emails to subscribers in the United States and more than 100 other countries alerting them that their accounts cannot be shared for free outside of their households. In addition, the company will offer account holders options to transfer a freeloader’s profile to their own paid membership or pay $7.99 a month for an extra member account.

The move to limit free password borrowing is part of a broader plan that Netflix has been executing since slashing its price in the U.S. last summer after a disappointing first quarter that saw it miss subscription growth expectations. The company has been looking for new ways to make money as it faces signs of market saturation, with efforts including limits on password borrowing and a new ad-supported option.

Last year, Netflix started testing a plan to force users to verify their accounts by requiring them to enter a four-digit code sent to their phone or email before they could continue watching. The test was widely panned by critics and some customers, who complained of being forced to verify their identities or having their viewing choices restricted. Despite the backlash, Netflix expanded that test into a full-scale password policy change that began in March of 2022 in Chile, Costa Rica, and Peru. It required verified account holders to share their usernames and passwords with others living in their household or create reduced-priced “sub-accounts” for people outside that main home.

On Tuesday, the company said it is extending that trial to more markets and will begin letting people who use their accounts outside of their primary homes know that they’ll have to pay a $7.99 monthly extra fee for each additional person in the family that wants access to Netflix. The company will also begin requiring password sharers to check in on their devices at least once every three months and delete any accounts that last used for a long time.

Analysts say the plan may work for Netflix, which still sees strong subscriber growth despite competition from Disney DIS -0.33% and Apple AAPL -0.4%. But it will likely be costly, as the company will need to spend more on programming and keep adding content at a pace that’s faster than its competitors to maintain that lead.

The company’s stock was up 0.8% in premarket trading on Tuesday. Still, it has fallen nearly 40% this year as investors fretted over the impact of a more aggressive approach to password-sharing and a possible lower-cost ad-supported tier. Still, some analysts say the crackdown is necessary to boost profitability, especially as its global subscriber base continues to grow. FOR EXAMPLE, Evercore ISI analyst Mark Mahaney cited two bullish data points in his latest note on the company.

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