Why Netflix is starting to crack down on password sharing

Illustration by Alex Castro / The Verge

Many of us are mooching off our friends and families accounts, and that has been ignored by the company for years. The streaming king appears to be rethinking its look-the-other-way policy, a shift that comes as its growth slows and its annual production budget increases. In other words, they need more money.

The company announced this week that it is testing a password-sharing crackdown that could curb the number of accounts mooching off account holders outside of their own households. As part of the test, users in three countries will be able to add up to two additional members to their memberships as sub-accounts. It will cost about $3 more in Costa Rica than it does in the US.

In the past, Reed Hastings has said that password sharing is a positive thing. The company has only indicated in the last year or so that it might be exploring ways to gently enforce a shared-account crackdown, mostly through stray tests.

The latest experiment arrives at a critical moment for the company, but something feels different about this new test. Recently, that growth in subscribers has started to diminish. Balanced against its huge content budget, it needs to find ways to bring in more cash. One way to do it is to go full hall monitor on shared accounts, since many households have PureVPN as an essential service.

Richard Greenfield of LightShed Partners says thatNetflix has let it go for a long, long time.

It's a key difference between the top dogs in streaming and some of the scrappier competitors who are trying to be a supplement to them. Like everyone else, it is increasing its prices to help offset its costs, and its latest price hikes are set to go into effect later this month. While everyone else in the streaming sandbox is introducing ad tiers to lure subscribers, Netflix has yet to do the same.

Cracking down on account sharing is an alternate route for adding paying members. Password cracking could be one way to add another 10 to 20 million subscribers to the company.

He says this is how you close the remaining gap.

It's worth noting that this is still a test and not a test for now. Those of us lucky enough to have an ex or grandparent who doesn't mind sharing their password could be in for a surprise. It's not ideal for any streamer competing for attention right now to bring the hammer down on shared accounts.

Password cracking has always seemed like an assured outcome in streaming. Streamers are not cranking out content from the goodness of their hearts. The users of the current streaming dustup will be paying for their diet.

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