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Netflix cracks down on password sharing, but here's why Aussies can chill

·3-min read
Netflix logo.
Netflix has been testing a stricter policy on password-sharing in three Latin American countries— Costa Rica, Chile, and Peru. (Source: Reuters)

Netflix recently announced that it would be cracking down on password sharing starting with three Latin American countries– Costa Rica, Chile, and Peru.

The streaming giant’s move comes in the wake of falling revenues due to a drop in the number of customers.

While Australians have been put on notice that the days of saving money by sharing subscriptions are numbered, it appears that they can breathe easy for a little while longer.

Cracks are beginning to show in Netflix’s effort to limit password sharing as reported by Rest of World.

Read more: Netflix is older than Google: 10 surprising facts

Read more: How Squid Game saved Netflix & why investors are bullish

Read more: $311 a month: How much your streaming addiction is costing you

Why curb password sharing?

Netflix reported a loss in number of subscribers for the first time ever after a dream run over the last 10 years.

It does not earn revenues from advertisements or commercials as Netflix CEO Reed Hastings believes "there is much more growth in the consumer market than there is in advertising."

At the same time sharing a subscription with friends and family all over the world resulted in drop in revenues.

A company report revealed that more than 100 million households are using a shared password, including 30 million in the U.S. and Canada.

But instead of freezing those shared accounts the company decided to levy an extra fee for accounts being used by multiple people outside of a household.

An alert would be sent to account holders whose passwords are being used by other households; and primary account holders would be charged an extra monthly fee (the equivalent of around $3 to $4 in each country's local currency) for every 'sub account', or 'password sharer'.

Happy couple eating popcorn and watching a movie online.
More than 100 million households are using a shared password, including 30 million in the U.S. and Canada. (Source: Getty)

What went wrong?

Widespread customer confusion and regulatory hurdles are being reported in Peru where Netflix has been testing the new policy on password sharing.

While Netflix’s terms of use have always stated that subscribers are not allowed to share accounts outside of their household, it couldn’t be or wasn’t enforced.

Now, the company is planning to enforce its policy that a 'household' consists exclusively of people the subscriber lives with.

People using a subscriber’s account but living in another house, city, or country will be in violation of the terms of use.

Aside from the confusion in the definition of 'household', for many people the price hike was reason enough to cancel their subscriptions.

The lack of clarity around how Netflix determines a 'household' and inconsistent levying of the new charges on different customers have left subscribers in Peru flummoxed, risking action from consumer regulators.

As it looks to expand its password-sharing crackdown by the end of 2022, Netflix is likely to use their findings from the smaller markets to dictate policy for password sharing globally.

What this could mean for Aussies

Until Netflix clearly defines what it means by 'household', the new policy is not foolproof.

The current definition means that it’s impossible to define which users are living within a household unless there is a thorough and customised verification of identities carried out by the streaming platform.

The policy cannot be rolled out seamlessly in Australia in its current state.

And while that’s bad news for Netflix, it’s great news for budget conscious Aussies who can continue to share the entertainment and the subscription costs with friends.

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