Netflix may clamp down on password sharing. Here’s what that means

By Frank Pallotta, CNN Business

Netflix shares plunged this week after the platform reported its first subscriber loss in more than a decade. One factor the company pointed to as hurting revenue: widespread password sharing.

Does this mean the streamer is about to kick millions of viewers off shared accounts? Not quite. But it could mean that Netflix subscribers around the world may have to pony up to keep their kids, friends or colleagues on their accounts.

For years, Netflix has allowed subscribers to share their passwords with little interference. In fact, the service admitted in its letter to investors Tuesday that the policy likely helped fuel its growth by “getting more people using and enjoying Netflix.”

Yet that growth has severely stalled, and Netflix said Tuesday that it’s now looking into how “best to monetize sharing.” The company noted that of its 222 million paying households around the world, it estimates that “Netflix is being shared with over 100 million additional households.”

Is this the end of Netflix password sharing?

So what does that mean for your account? It’s unclear since Netflix is in the early stages of figuring how to make more money from account sharing.

Last month the company said that it has been working for a year on ways to “enable members who share outside their household to do so easily and securely, while also paying a bit more.” Translation: you’re going to have to pay for those extra folks on your account.

The company has rolled out two test features in three overseas markets called “Extra Member” and “Profile Transfer.” The costs vary based on a number of factors, but Netflix said the features can be added for “a fraction of the price of a Basic Plan.”

With “Extra Member,” subscribers to Netflix’s standard and premium plans can add an account for up to two people who don’t live with them.

These “extra” members will have full access to the main Netflix account, and have their own profiles and login. Extra memberships won’t be counted in Netflix’s overall paid subscriber figures.

So if you have someone on your Netflix account who doesn’t live in your household — a kid away at college, a friend, a distant cousin, whatever — you’ll be paying extra for their access.

The “Profile Transfer” option lets subscribers at any price tier transfer their profile information — namely their viewing history — to a new paid account.

Both features are currently being tested in Chile, Costa Rica and Peru. Netflix typically tests new features in smaller markets before rolling them out on a larger scale, and at this point it’s unclear if “Extra Member” or “Profile Transfer” will become a bigger offering or be scrapped.

However, with the company’s stock plummeting and investors questioning its future growth potential, it’s a good bet that these or similar options could be implemented sooner rather than later.

As goes Netflix, so goes streaming

“We’ve always tried to make sharing within a member’s household easy, with features like profiles and multiple streams. While these have been very popular, they’ve created confusion about when and how Netflix can be shared with other households,” the company said Tuesday. “While we won’t be able to monetize all of it right now, we believe it’s a large short- to mid-term opportunity.”

Then again, making customers pay for the privilege of sharing their accounts could backfire. Netflix already raised its prices earlier this year; additional costs could alienate its base.

The company is still in the early days of working out how to monetize password-sharing, and if Netflix clamps down on the practice other services are likely to follow its lead. As the bellwether of the streaming world, Netflix’s decision could have industry-wide ramifications.

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