April 26, 2022: -This week, Netflix surprised the world, saying it plans to address the rampant practice of password sharing.
Over 100 million households use a shared password, Netflix said on Tuesday, including 30 million in the U.S. and Canada.
But the video streamer doesn’t plan to freeze those shared accounts. Instead, the company will favor setting an extra fee for those accounts being used by multiple people outside of the home.
Netflix is planning to capture that lost revenue would start with an alert being sent to account holders whose passwords are used by other households.
For accounts sharing a password across addresses, Netflix charges an additional fee to add “sub accounts” for up to two people outside the home. The company has started testing this feature in Peru, Costa Rica, and Chile. Based on current exchange rates, the pricing is the different per country, almost $2.13 per month in Peru, $2.99 in Costa Rica, and $2.92 in Chile.
The company is allowing people who use a shared password to transfer their personalized profile information to either a new account or a sub-account, keeping their viewing history and recommendations.
“If you’ve got a sister, let’s say, living in a different city, you want to share Netflix with her, that’s great,” said Chief Operating Officer Greg Peters during the earnings conference call of the company. “We’re not trying to shut down that sharing, but we’re going to ask you to pay a little more to share with her so that she gets the benefit and the value of the service, but we get the revenue associated with that viewing.”
Netflix did not say the amount of the revenue it expects to generate from implementing its sharing strategy worldwide. However, Peters said he thought it would take about a year to put its sub-account pricing globally.
A survey from research organization Time2Play suggests nearly 80% of Americans who use someone else’s password wouldn’t get their new account if they couldn’t share the password. It did not survey how many current account payers would be willing to pay more to share with others.
Peters suggests the company may still tweak pricing or review its test strategy.
“It will take a while to work this out and get that balance right,” he said. “And so just to set your expectations, I believe that we’re going to go through a year or so of iterating and then deploying all of that to get that solution globally launched, including markets like the United States.”