Netflix Will Force Password-Sharing Users to Pay Extra Soon

For the past year Netflix has been openly speaking about the problem that password-sharing has had on their bottom line. The practice, wherein paid users let others not in their home have their log-in information in order to use Netflix, will officially end in the United States starting very soon. In the company’s most recently quarterly earnings letter to investors, Netflix writes that: “In Q1, we launched paid sharing in four countries and are pleased with the results. We are planning on a broad rollout, including in the US, in Q2.” So what is paid sharing on Netlfix?

Paid sharing for Netflix subscribers comes down to one account being considered a household. While users will be able to stream within the means of their subscription tier in their own household, users on that same account that are not in the same household will have to pay extra. There are two forms that this takes, either adding on to the subscription that already exists or allowing users to spinoff their profile from the main account into its own subscription. The short version is that if you’re password sharing in some form, someone is going to have to pay up, either you or the person that’s using your account.

According to Netflix, of their 230 million+ subscribers worldwide, they estimate that 100+ million households are currently sharing their password. As they put it, account sharing “undermines (their) ability to invest in and improve Netflix for our paying members.” Netflix is also clear that any time they mention cracking down on password sharing that a lot of talk of users cancelling their subscriptions sees a dramatic rise. They note that after this furor dies down though, many users seem okay with the practice.

“We see a cancel reaction in each market when we announce the news, which impacts near term member growth,” Netflix writes. “But as borrowers start to activate their own accounts and existing members add “extra member” accounts, we see increased acquisition and revenue.”

The paid sharing practice was rolled out in Canada prior to the United States, with Netflix writing: “In Canada, which we believe is a reliable predictor for the US, our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the US.”

Netflix concluded their letter to shareholders by reminding them when the eventual paid-sharing launches it will likely result in “near term engagement” measured by Nielsen and others to “shrink modestly.” They maintain that in the end it will be a good thing overall and subscribers won’t have a problem with it. Official pricing for paid sharing on Netflix in the United States has not been confirmed as of this writing. In Canada the pricing is $7.99 while the number fluctuates across territories.

(Cover photo by Rafael Henrique/SOPA Images/LightRocket via Getty Images)