Netflix has released details about its new rules on password sharing. The company has been planning on cracking down on the practice for more than two years but confirmed its commitment to do so last year.
The plan was one of several Initiatives the company took to improve its bottom line and attract more subscribers (including a low-cost ad-supported tier launched in November) after reporting declining revenues and subscriptions a year ago.
In a report issued in 2021, Citi analyst Jason Bazinet estimated that password sharing could be costing Netflix upwards of $6 billion in annual revenue.
The new password regime has been tested in several Latin American countries for the past several months. Earlier this month, the company notified investors that it expected to roll out the new rules to take effect in the U.S. by the end of Q1—the end of March at the latest.
In an FAQ on its website, Netflix said that each household will need its own separate account and that when a device outside of the household logs into the account (“or is used persistently”), it could prompt the viewer to verify the device by using IP addresses, device IDs, and account activity from devices signed into the Netflix account.
“As long as the device being used to watch Netflix is using the internet connection in the primary account owner's household, we will not require verification,” the company said..
Netflix will verify the account by sending a link to the email address of the phone number associated with the primary account owner; the link will provide a 4-digit verification code which will need to be entered on the device being verified within 15 minutes. Such verification may be required periodically,
Netflix is so confident that the device verification process will work that it added that it doesn’t expect primary account holders to be charged extra if a password is shared on an unverified device. “Netflix will not automatically charge you if you share your account with someone who doesn’t live with you,” it said.
Netflix says it won’t require device verification for subscribers (or members of their households) who are travelling or live between several homes, however it may require device verification if the subscriber is out of the main household “for an extended period of time.”
Netflix currently offers four tiers per household:Basic and Basic with Ads, which allow for viewing on one supported device, Standard, which allows for 2, and Premium which now allows for viewing on six supported devices (announced today).
A year ago, a survey from LRG revealed that a third of all Netflix subscribers share their passwords to someone outside of their household.
