Netflix's password-sharing test in Peru is confusing subscribers, report suggests

It’s been a bumpy ride for Netflix recently, and the announcement that it will be charging for password sharing hasn’t gone as smoothly as it might have hoped, a new report claims. Subscribers in Peru who were opted in to new password-sharing restrictions have reported confusion over Netflix's loose definition of “household" and noted the lack of clarity around the differing charges imposed on consumers.

Global tech news site Rest of World informally surveyed more than a dozen Netflix users in Peru, after Netflix's March announcement that it would be asking customers in the country -- as well as in Chile and Costa Rica -- to pay extra when sharing their account passwords outside their homes. Central and South America represent Netflix’s lowest revenue per user, which helps to explain the markets' selection.

The majority of those surveyed by Rest of World in Peru said that they have still not received uniform messaging around the new charges, even though it’s been over two months after the policy was first announced. Some subscribers experienced the price increase and then canceled their Netflix accounts as a result. But others who ignored the message about the new policy were able to share their accounts across households without an extra charge, they claimed.

An anonymous Netflix customer service representative reportedly told Rest of World that if a customer called in to argue that a member of their immediate household was using the account from a different location, the rep was instructed to tell them that person could continue to use the account via a verification code without experiencing an extra charge. This basically meant those who called in for support could ignore the new policy and continue to share the subscription without repercussions. The rep said members of their team were often confused about the policy as well. In a statement to the outlet, the company said that the rollout has been "progressive."

A Netflix spokesperson told TechCrunch, "While we started working on paid sharing over 18 months ago, we have been clear for five years that 'A Netflix account is for people who live together in a single household'. The millions of members who are actively sharing an account in these countries have been notified by email, but given the importance of this change, we are ramping up in-product notifications more slowly. We're pleased with the response to date."

According to Statista, in 2021, Netflix generated approximately US$3.58 billion in revenue with its operations across Latin America. The figure accounts for around 13.4% of Netflix's global revenue that year, which in total amounted to approximately $30 billion.

In Peru, two additional people using a subscriber’s account but living in another apartment, city or country are charged 7.9 soles (about $2.99) per month each. This option is cheaper than creating new Netflix accounts, as Peruvian subscribers pay 24.90 soles (around $6.80) for a basic plan.

While Netflix has long had a policy against sharing passwords, it was never heavily enforced. In fact, Netflix CEO Reed Hastings has previously said that it was a good thing.

However, after the particularly harsh Q1 2022 that saw Netflix’s first drop in overall subscribers since 2011, the streaming giant has made it clear that it will charge extra for those that split a subscription across multiple addresses. Approximately 33% of Netflix subscriptions are shared in multiple households, per Leichtman Research Group. Netflix confirmed this in its recent earnings report by saying approximately 100 million households have freeloaders logged in to the streaming service account.

Analysts predict that Netflix subscriber growth has peaked, and the company seems to have hit a ceiling of 220 million subscribers. In addition, the streamer has laid off around 150 workers after losing 200,000 subscribers in the first quarter.

Given the confusion around early adopters' firsthand experience with the new feature, Netflix will likely need to revise the password-sharing system before launching it worldwide. The company intends to extend the rollout at the end of 2022, in tandem with the launch of a cheaper ad-supported tier.

Updated May 31, 2022, 5:15 p.m. with a comment from Netflix spokesperson.