Netflix cracks down on password sharing in the US: Everything you need to know

Netflix has officially started cracking down on password-sharing practices among users. Following the implementation of similar restrictions in Canada, Spain, Portugal, and New Zealand, Netflix is now enforcing account-sharing limits in the US.

According to the streaming company, only individuals residing in the same household can share Netflix accounts. Users have two options: either transfer their friends and family members who have been using their account to a new membership or share their Netflix account by paying an additional $8 monthly fee.

“Your Netflix account is for you and the people you live with – your household,” stated Netflix in an email sent to US subscribers.

The monthly fee for password-sharing is cheaper than the basic ad-free plan, which costs $10 per month but is more expensive than the ad-supported plan at $7 per month. Standard plans are priced at $15.49 per month, while premium plans cost $20 per month.

Previously, Netflix encouraged sharing account credentials with friends and extended family. However, in light of slower subscriber growth and increased competition, the company has changed its stance, aiming to generate additional revenue from those who have been using the service without paying.

Ted Sarandos, the co-CEO of Netflix, explained, “This is a way of getting folks who watch and enjoy Netflix to also contribute to the future of content.”

According to Cowen senior research analyst John Blackledge, Netflix could potentially gain 2.1 million new subscribers in the US through this initiative. In February 2023, Nielsen reported that Netflix accounted for 7.3% of total TV viewing.

While the password-sharing crackdown presents a significant revenue growth opportunity for Netflix, Moody’s Investors Service warns of potential short-term subscriber discontent and disruption. Wells Fargo Securities suggests that paid password sharing could be a more lucrative earnings opportunity for Netflix than people signing up for its ad-supported subscription.

A survey conducted by New Street Research indicates that if their access to Netflix was terminated, more than half (54%) of paying and non-paying users would opt for their own subscriptions. Additionally, 70% would choose a subscription without advertising, and 37% would be willing to pay extra for non-household members.

However, there is some risk involved. After implementing password-sharing restrictions in February, Netflix lost over 1 million users in Spain during the first quarter of 2023, as reported by market research group Kantar. Nevertheless, the company stated that after the initial wave of cancellations, subscribers began adding “extra member” accounts, and the number of paying subscribers in Canada is now higher than before.

The decision to crack down on password sharing stems from a Parks Associates survey conducted in 2022, which found that 40% of consumers in U.S. internet households share credentials or use shared credentials—an increase from 27% in 2019. Netflix claims that approximately 100 million people watch its content using someone else’s account, contributing to an estimated $25 billion annual loss for streaming services, with Netflix accounting for approximately 25% of that lost revenue.

To determine who shares a household, Netflix relies on IP addresses, device IDs, and account activity from devices signed into an account. The company had previously tested features in Chile, Costa Rica, and Peru that allowed accounts to pay extra to share access with up to two individuals outside of their household.

While the gradual rollout of password-sharing limitations has faced criticism worldwide, particularly from families with college students or long-distance couples, Netflix asserts that cracking down on “unpaid viewing” is necessary due to slowing subscriber growth. Although they acknowledge that the new policy may not be popular and could lead to account cancellations, they hope to win back subscribers through quality programming.

Netflix will enforce the password-sharing crackdown by using device and network signals to determine if other users accessing an account are part of the same household. If they are not, those users will be prompted to start their own accounts or face being locked out. Alternatively, the account holder can pay a monthly fee to add another household.

Travelers can still access Netflix on personal devices or by logging into a new TV at a hotel or Airbnb while away from home.