Netflix cracks down on users who share passwords after hiking subscription fees

Netflix Inc is testing a feature that asks viewers to verify they share a household with the account holder, the company said on Thursday, a move that could lead to a clampdown on sharing of passwords. 

A small number of Netflix users are receiving a message asking them to confirm they live with the account owner by entering details from a text message or email sent to the owner.

‘If you don’t live with the owner of this account, you need your own account to keep watching,’ the message said. 

Viewers can delay the verification and keep watching Netflix. 

But the message may reappear when they open Netflix again, and eventually they could be required to open a new account to continue streaming.

‘This test is designed to help ensure that people using Netflix accounts are authorized to do so,’ a Netflix spokesperson said.

Netflix, the world’s largest streaming service, constantly tests new features with users and it is unclear if the household verification requirement will be implemented more widely.

The Netflix terms of service say that users of an account must live in the same household, though the company and other streaming services have declined to broadly crack down on sharing.

Netflix has historically ignored password sharing, since strong growth in subscribers and the company’s steady stock price have offset concerns about lost revenue. 

But the site now faces increased competition from new streaming services, including Disney+, AT&T’s HBO Max, NBCUniversal’s Peacock and ViacomCBS’s Paramount+. 

Research firm Magid determined about 33% of Netflix users share their passwords with at least one other person. 

Netflix launches hundreds of tests yearly with select customers, according to the company headquartered in Los Gatos, California.

Co-Founder and Director of Netflix Reed Hastings delivers a speech as he inaugurates the new offices of Netflix France, in Paris in January 2020

This trial may not lead to a larger crackdown around password sharing. The test could be applied to uses involving account security in addition to password sharing policies. 

Netflix co-founder and CEO Reed Hastings addressed password sharing during an earnings webcast in 2016.

‘Password sharing is something you have to learn to live with, because there’s so much legitimate password sharing, like you sharing with your spouse, with your kids,’ Hastings said. ‘So there’s no bright line, and we’re doing fine as is.’

A 2019 study conducted by Cordcutting.com found there were more than 40 million accounts for major streaming systems being ‘borrowed’ by non-paying users.

Yet a portion of those users said they would pay for their own account if they lost access, which represented more than $2.7 billion in potential revenue for streaming services.

Netflix has underperformed the S&P index this year, but a strong stock price is one of the reasons the company normally has not been overly concerned about loss revenue from shared passwords

The move to clamp down on password sharing came after Netflix hiked their fees. 

The company’s standard plan went up by $1 from $12.99 to $13.99 per month, and  allows users to watch Netflix on two screens simultaneously. 

The price of the premium Ultra-HD tier was increased by $2, to $17.99 per month.

There was no change to the basic plan, which costs $8.99.

The hikes were announced back in October for new subscribers, while existing subscribers saw their fees increase in February. 

Netflix announced earlier this year that the company topped 200 million global subscribers.

Yet shares have underperformed the S&P 500 index this year as investors moved away from growth stocks.