Man with remote watches streaming VOD service Netflix on big screen TV

Netflix Cracks Down on Password Sharing

What is now a test could become a permanent enforcement tool.

Password sharing with people outside your household may seem innocent enough, but it is becoming a problem for streaming subscription services like Netflix, Disney+ and HBO Max. Netflix is trying to crack down on the problem by testing a feature that requires viewers to verify they have authorized access to the account. When viewers log in, they are asked to enter a code emailed or texted to the subscriber by Netflix (two-factor authentication). Don’t have the code? You might have to get your own subscription to watch Ginny & Georgia or Cobra Kai.

GammaWire first reported the feature last week. According to GammaWire, viewers have the option to select “verify later,” but it is not known how long non-subscribers can continue to use a subscriber’s account service without verifying their identity or getting their own Netflix subscription. GammaWire said the testing does not appear to be widespread.

Image courtesy of GammaWire.

“The test is designed to help ensure that people using Netflix accounts are authorized to do so,” said Netflix in a statement.

What’s the big deal?

Why is this a problem? When family and friends share passwords, the streaming services lose out on subscription revenue, and subscribers are in violation of their terms of service for video piracy and could potentially lose their accounts. This is also an issue as competition among streaming services gets more heated. There are more players in the streaming marketplace now that have a broad base of content. Netflix and its competitors want to be sure they are getting paid for the content viewers are seeing. Cracking down on password sharing is one way to do that.

Interestingly, in 2016, TechCrunch wrote that the sharing of passwords was actually allowed – even encouraged – by Netflix. Netflix CEO Reed Hastings said that sharing passwords helped get viewers hooked on the service and their favorite shows they couldn’t see elsewhere. For example, when kids share a plan with their parents, when they grow up and leave home, he believes they’ll subscribe on their own.

“As kids move on in their life, they like to have control of their life, and as they have an income, we see them separately subscribers,” Hastings said. “It really hasn’t been a problem.”

Apparently, Netflix’s stance has changed. Netflix users, however, are not thrilled.

Most Netflix users aren't fans of the crackdown on password sharing.
Most Netflix users aren’t fans of the crackdown on password sharing.

Subscribing to Netflix

There is no need to ring the alarm bells just yet. This is only a test, and Netflix has not imposed a “hard paywall” just yet. Non-subscribers who don’t share a household with their password sharing pals can get their own account for as little as $8.99 a month, which gives them access to one screen at a time. Standard and premium plans are a bit more expensive, but they offer more screens and downloads.

Netflix pricing as of March 13, 2021.

Insider Take

I know several people who share passwords and don’t see the harm in it. Afterall, they have limited incomes and the big streaming services make millions, even billions, of dollars in subscription fees. Those same streaming services also have big expenses, particularly when it comes to acquiring top quality content, maintaining the technology platforms to support their operations, and innovating to continuously improve the customer experience. They have a right to enforce their terms of service and to be paid fairly for the content they provide. While Netflix may not choose to play hardball just yet, this is a peek at the future for Netflix and its competitors. At some point, they will enforce the rules, to the extent possible.

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