How Stopping Netflix Password Sharing Will Change the Way Family Watching

Is sharing a Netflix password a cybercrime?

That will mostly be a thing of the past soon if the world’s biggest streaming service gets its way. After experimenting with a plan to combat password exchange in Latin America, Netflix will launch a US version of this subscription-tracking technology in March, but is silent on the details of how it will work. That is, until the beginning of this week, when Netflix FAQ Page change picked up by the press pointed out that any user monitoring an account from outside the “primary location” can receive a temporary code to verify usage for up to seven days – to cover the account user’s legitimate travel. But this FAQ page was later updated again to remove these details.

At stake: The future of more than 100 million households, the company says, share passwords, more than 40% of the company’s 231 million paid memberships. And beyond that, how are all media companies moving the latest generation of linear cable subscriptions to the Internet coping with a financial environment in which there is a greater need to profit from the high costs of streaming. The days of the Netflix Twitter account and former HBO head Richard Plepler saying the media company’s main goal was to get people hooked on streaming are over. Back in 2014, allowing people to share passwords was “an amazing marketing tool for the next generation of viewers,” Plepler once told BuzzFeed. A decade later, it’s time to pay the next generation.

And yes, it looks like families that share passwords with kids who are in college are being targeted for reprisals.

Netflix’s terms of use restrict the sharing of passwords between people who live together in the same location, indicating that college students may not be allowed to do so. There’s a subtle point here: college students often don’t change their permanent address until after graduation. Even two analysts who follow Netflix have admitted that their college-age kids are using the family’s Netflix account so far.

“I have a daughter who is in college in Florida and uses the TV to watch — I suspect it will cost $5 more per month,” said Rich Greenfield, who oversees Netflix for LightShed Partners. “If she only watched on a laptop or phone, I suspect it wouldn’t be an extra cost. I suspect most parents will absorb the extra cost. While friends and extended family will need to get their own accounts.”

“Almost everyone I know who shares passwords communicates with their families,” said Wedbush analyst Michael Pachter. “My kids are in college, so it’s legal. I support them. She is part of my family. [my daughter] on her own, she can get her own password.”

Netflix spokeswoman Kumiko Hidaka declined to say how Netflix plans to specifically target college students. The company’s terms of use require people to live in the same place to share a password.

In testing in Chile, Costa Rica, and Peru, Netflix uses information such as IP addresses, device IDs, and account activity from devices registered with a Netflix account to detect persistent non-household sharing. The company’s terms of use already require customers to consent to Netflix tracking this information in order to provide the service.

In the US, where subscribers are allowed to use their subscriptions while traveling, the service is already using similar methods to find out if subscribers signing up from hotels or Airbnbs are who they say they are. In such cases, the company will send a code to the primary account holder, which must be entered in order to continue working, as explained on the post-deletion FAQ page, with a maximum temporary code request period set at seven days.

A quick fix to this problem for many who share passwords is a quick text chain from the subscriber to the friend or child using the account. The toddler tells mom and dad that they’re about to sign in, Netflix sends the code to the owner of the main account, and the parents send it to the toddler who enters it. Pachter said in an interview before updating and deleting the FAQ page that Netflix could limit this by imposing a short time limit on how quickly a person trying to access the service can respond to an authentication attempt. But the FAQ suggested that the longer duration might be related to the maximum number of days it can run.

Greenfield, more than Pachter, said he expects Netflix to crack down on college-age users of shared passwords. Netflix may use the college market as a key target for the Extra User Plan, which adds $2.99 ​​per month to bills and is now offered in Costa Rica, Peru and Chile for customers who want to add up to two friends or family members not live with them at their expense.

The result may look like a path Spotify works where cheap add-on plans are available, or the upcoming plan may resemble cell phone plans that allow friends and family to pool lines in exchange for lower rates.

“I don’t think I would pay $15 a piece,” Pachter said, but he could include the lower price in the family package. “I would advise them to deal with your roommate. But I’m not going to not pay $16.99. [for the family]. What should I do – save $4?”

The company should leave college students alone and focus on getting them to self-register after graduation, Pachter said.

Pachter is also not a fan of the plan, as it was briefly revealed, which he says misses the details of how many families use Netflix. The leaked method included a 31-day break for any device not logged into the main location’s home network. But in his own home, for example, the little-used TVs in many rooms can run into trouble when guests or kids returning from college try to turn them on.

“When Netflix blocks access to these devices in the same place, it annoys me,” Pachter said. “Also, this plan could backfire on paying customers who don’t use the service for months. They can get blocked and decide it’s easier to refuse.”

In Latin America, users in countries where password enforcement is in place and who cannot be added as additional members to an existing account can get their own for $8.99 per month. In the US, the cheapest option is the Basic with Ads plan, introduced in November at $6.99 per month. The ad-supported plan is not yet available in Peru, Costa Rica, and Chile.

Netflix announced this week, several improvements to its premium plan related to audio quality and permissions to download on more devices.

Netflix’s plan will likely include low-cost options for consumers who need a “little nudge” to create their own account, co-CEO Greg Peters said on a Jan. 19 conference call.

“Part of it’s just what we call a random exchange, meaning people can pay but they don’t have to,” Peters said. “So, they’re borrowing someone’s account.”