Netflix’s crackdown on password sharing is almost here

Just like it signaled, and then threatened, and then promised to do multiple times in the past, Netflix is now ready to enforce its policy against account sharing across all markets during the next few weeks. The company confirmed as much during its recent earnings report, although the exact way it plans to do so is not actually clear and it may differ from region to region or even from country to country. Netflix will probably be testing the limits of loyalty its subscribers are prepared to show over the next few months — its executives seem prepared for that — but, in truth, this has been a long time coming.

The wording in Netflix’s report is carefully chosen: “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”. “We’ve worked hard 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. As we roll out paid sharing, 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”, it added.

Again, that careful wording: the report mentions that the choice to transfer “freeloader” profiles to new accounts will be available in “many countries”, as in “not every country”. This will most probably also be the case regarding the choice of the once-common account paying a small fee on top of its monthly subscription in order to keep sharing its password with other profiles. Needless to say, there’s bound to be some initial confusion about the choices consumers in different countries will have after Netflix’s crackdown on password sharing begins. The company did promise, though, that Netflix subscribers traveling a lot will not have a problem accessing the service’s content on any device.

That the company is now open about the reasons why it’s moving ahead with the enforcing of its policy against password sharing is rather telling. According to this earning report “more than 100 million households” have access to Netflix’s content through password sharing, “seriously undermining the company’s long term ability to invest in the service and improve it, as well as build its business in general”. It’s a huge number and, understandably, a big opportunity: even if 1 out of 10 “freeloaders” decides to get his/her own Netflix account, that’s 10 million more subscribers for the service (at least according to the company’s estimates) and a source of revenue previously untapped.

This is all well and good, but there are still a couple of things that could go wrong with Netflix’s plan. It’s still unclear, for instance, whether the company has actually managed to perfect its “freeloader detection system”, in lack of a better term, so as to not unnecessarily inconvenience lawful subscribers. Consumer feedback on the enforcing of this policy is also something of a question mark right now: Netflix has been talking about this for more than two years and it’s not like people are not aware of this possibility. There’s certainly going to be some backlash online, though, so how much of a PR problem this will actually prove to be for the company remains to be seen.

In terms of Netflix’s general strategy, there are those who insist that Netflix would see its subscriber base grow in a much steadier, more predictable pace long-term if it focused on raising the quality of its programming. But Netflix seems to still be going the other way, focusing on quantity rather than quality — if its recent “2023 Films Preview” trailer is any indication — so this enforcing of policy is an obvious, easy choice in terms of growth. Rest assured, every other streaming service currently in operation — from Disney Plus to Amazon Prime Video to HBO Max to Apple TV Plus and more — will be watching Netflix’s crackdown on password sharing closely. If the company manages to handle this smoothly, then practically everyone else will follow suit sooner rather than later. Funny how that works, no?