Netflix’s password sharing crackdown is confusing test markets

How do you define “household”?

words by: Kayla Carmicheal
Jul 27, 2022

Netflix is serious about coming down on password sharing, and in March, the crackdown launched in Chile, Costa Rica, and Peru. However, confusion and negative feedback has led to subscribers cutting their losses with the platform altogether.


So here’s why Netflix is even doing this in the first place: Essentially, to save money. Spring was a wild time for the company. If you’ll recall, the company lost 200,000 subscribers and its stock fell over 20%. Obviously, this spells bad news for stakeholders, and Netflix needed to give some answers.


In a letter shared with investors, Netflix says “Our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.”


Basically, the company states that password sharing is a big reason why the streaming service is losing money and subscribers, so obviously, that needs to be remedied. The policy is intended to be easy to follow, but customers aren’t following, and it’s not hard to see why.


How the policy works

Netflix’s terms of use have always stated that subscribers can’t share passwords, but we know there’s not really an accurate way to control this, so it’s never been enforced until now. Apparently, subscribers have to pay an extra fee for users outside of their household to use the service. It rounds out to about $2 USD per user, but varies from country to country.


The policy concludes that a “household” means people a subscriber lives with—but again, how is this determined? For example, like many other scenarios, my sister has a Netflix account my parents and I use, but my parents and sister have houses, and I live in an apartment. So would that tack on $4 extra dollars to my sister’s monthly bill, which has already been steadily climbing for years? Apparently, yes.


In Peru, using a subscriber’s account from another dwelling will be in violation of the terms of use. Not only is that confusing, but some subscribers were either not notified about the change, or have ignored it without repercussions. So again, how is the crackdown supposed to work? (But the extra fee is way cheaper than signing up for a new account, a Netflix exec says). Affected subscribers aren’t bothering, since many have opted to leave the service altogether, instead of trying to figure out the policy change.


There’s a reason Netflix chose these countries, too. Basically, double the amount of people use Netflix in these places, as opposed to other services. Further, they were chosen “so they don’t potentially suffer a large amount of subscriber goodwill lost.” So I have to wonder how Netflix sees this crackdown being received.


While you’re here, if you’re invested in Netflix updates like I am, check out 6 reasons why Netflix is on the struggle bus.