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Netflix reveals details on password sharing crackdown

Yahoo Finance Live's Dave Briggs leads the discussion on how Netflix's password crackdown is expected to affect customers' accounts and subscriber sentiment.

Video transcript

DAVE BRIGGS: From the tweet that didn't age well file, here's a beauty-- love is sharing a password. Netflix sent that out nearly six years ago, and now it seems the company has had a change of heart. The question for Netflix now is, do you love the streaming giant enough to pay for your own account? Netflix has begun enforcing its no password sharing policy by officially updating its help center for countries currently in the crackdown zone. That's Chile, Costa Rica, and Peru. But the US may be up next. So pay attention to these changes.

Sharing your Netflix account with someone outside your household will get you on the naughty list. Users will be asked to identify the primary location for the account. And you'll need to sign in to your primary location at least once every 31 days to keep that setting up to date. Now, here's where it gets stickier. If someone logs into your account from a device not affiliated with that primary location, their device may be blocked. If you're traveling and you log on to your Netflix account, you can request a temporary code and watch Netflix for seven consecutive days. If your trip is longer than 31 days, you'll need to update your primary location.

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Getting heated yet? I am. Netflix will be using IP addresses, device IDs, and account activity to determine if a device is connected to your primary location. The policy is indeed good news for Netflix and its investors as the company is said to lose around $6 billion a year on customers who share passwords. The added revenue only strengthens its case as the clear streaming leader.

- I think Netflix is the Kleenex of streaming, bottom line, period. Best run, cash flow. Now they're going into advertising. Fantastic. They will be the core.

DAVE BRIGGS: I don't disagree with that. But how this policy is received in the short-term will fall somewhere between Southwest Airlines holiday meltdown and the Taylor Swift Ticketmaster debacle. Yes, the vast majority will shake it off. But brace yourselves for-- pardon the second Swifty reference-- bad blood. Parents with kids in college, pay. Kids at boarding school, pay. Kids studying abroad, pay, pay, pay. Couples who have long distance relationships, you pay one that, at its surface, as simple as a red light, green light game.

Once you dig below the surface and see how this will become a constant annoyance for many of Netflix's 220 million subscribers, you can see this is actually more of a "Squid Game" red light, green light, because there will be casualties, much like in that show. I will be one of them. I guarantee it because I think the constant annoyance, Seana, of logging on, logging off, getting locked out of your account when your kids might be gone, my wife travels without me with her-- with the kids sometimes. They're going to get logged out. I love "Wednesday," but once I'm through with it, and this annoyance starts, adios. Your thoughts?

SEANA SMITH: Yeah, I totally agree. I think they are going to lose a number of subscribers right now because of the crackdown. But they simply don't care. They see it being a bumpy ride at least in the near term. But long-term, they actually see an improvement in engagement. When you take a look at a number of the analyst notes that have been out there, Cowen saying that they think it could add about $1.6 billion in global revenue once they have a widespread crackdown on password sharing. 100 million households they estimate share passwords.

DAVE BRIGGS: I'm not going to disagree--

SEANA SMITH: I would be in that.

DAVE BRIGGS: --Cowen. I'm just saying, if you don't have sticky content--

SEANA SMITH: Oh, yeah, people are leaving.

DAVE BRIGGS: --then it will hurt. Wednesday's fantastic, and some of the hits they've produced are certainly. But you better continue a steady stream of sticky shows, or people will not return.

SEANA SMITH: And you need to, just given the sheer competition out there. And people have so many other choices at this point.