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Netflix Is Cracking Down on Password Sharing. Here’s What You Need to Know

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Updated: | Originally published:

Netflix faced immediate backlash in March after announcing that it was going to begin making some subscribers pay an additional fee for sharing their account with users outside their household. The company then said in an April shareholder letter that it lost 200,000 subscribers in the first quarter of 2022 and forecasted greater losses to come. But some users, especially younger ones, are left wondering how password sharing changes will affect their own bottom line.

“On the business front, I understand Netflix’s move. But as a user, I find it frustrating,” says Vel Mensah, a 33 year-old Netflix user in New Jersey. The outcry on Twitter was similar, with some saying that they wouldn’t use Netflix at all without being able to share an account.

Netflix has turned to price increases to raise more money amid reports of slowed subscriber growth. Lost revenue from password-sharing has affected the company’s ability to “invest in great new TV and films,” it said.

Estimating that over 100 million households worldwide are using shared accounts, Netflix said in its quarterly shareholder letter that cracking down on password sharing would be a “big opportunity” for revenue growth going forward.

But it could risk alienating a large chunk of its 200 million-plus paid subscriber base if it starts strictly enforcing anti-sharing policies. Netflix is most popular in the United States with younger consumers, who support password sharing much more than older generations: A 2021 survey conducted by tech research site Comparitech found that millennials and Gen Zers are around twice as likely as Gen Xers and baby boomers to both share their streaming passwords with non-paying friends and family and accept free access to others’ accounts themselves.

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Here’s what you need to know about the new rules.

Who is affected by Netflix’s new limits on password-sharing?

The streaming giant said that it is currently only experimenting with charging for password sharing in Chile, Costa Rica, and Peru. Even then, users would need to opt in to be subject to the rules, a Netflix spokesperson tells TIME.

However, users in the U.S. and other parts of the world seemed to take the news to mean that they might soon be subject to stricter rule crackdowns. Mensah said the rule leaves her “wondering what’s next.”

What are pricing and password-sharing rules in the US right now?

Netflix subscribers in the US can use their account on one, two, or four screens at once and prices reflect the number of screens available—ranging between $9.99 and $19.99. When Netflix launched its streaming service in 2007, subscribers received one hour of streaming credit for every dollar they were paying for Netflix’s DVD rental service. So if they were paying for the $17.99 rental plan (allowing them to rent three DVDs simultaneously), they could also stream 18 hours of content per month. In 2010, Netflix introduced its first streaming-only subscription plan for $7.99 per month.

Prices across all plans have gone up steadily in recent years, though, with the latest hike in January. Plan prices now range between $9.99 and $19.99, with the most expensive plan allowing streaming on up to 4 screens. All the users with access to a master account are supposed to be within the same household, though they may be watching on different screens. However, if you share a password with someone who lives elsewhere, Netflix doesn’t take any action against you right now. That’s what users are worried about, especially as prices rise.

Alex Parrella, a 33 year-old subscriber in Massachusetts, says he’s beginning to question whether he’s getting enough value from Netflix. “If [prices] keep creeping up, I’m not sure it’s going to be worth it for me,” he says.

What about password-sharing in Chile, Costa Rica, and Peru—the places affected by the new rules?

In the coming weeks, Netflix will let subscribers in Chile, Costa Rica, and Peru who share their password outside their household choose between two new options. They can either start paying a fee to add up to two “extra member” accounts to their subscription, or they can enable users who are outside their household to transfer their existing profile information—including viewing history and personalized recommendations—to their own new account. Even this change is being introduced carefully: these features are optional for the time being, which means subscribers won’t be automatically charged for sharing, Netflix’s spokesperson says.

Netflix said in its release: “We’ll be working to understand the utility of these two features for members in these three countries before making changes anywhere else in the world.”

Thirty-seven-year-old subscriber Justin Balich says that even the company’s piloting of a password-sharing crackdown doesn’t bode well. If a user is paying for multiple people to log in, they shouldn’t need to be under the same roof, he says: “if one of those devices belongs to your best friend, that should be up to you.”

The bigger picture

Netflix’s announcement is making some users take a closer look at which streaming services are actually providing them enough value. As studio-owned services like Paramount+ and Peacock pull their content off juggernauts like Netflix and Hulu to build up their own streaming libraries, the spread of popular TV shows and movies is increasing. This movement has coincided with Netflix and Hulu raising their prices, creating a dilemma for users with tighter budgets. Someone who subscribes to five popular services like Netflix, Hulu, Amazon Prime Video, HBO Max, and Disney+ would be paying between $43 and $65 per month, which is similar to the average cost of a starter cable bill.

For streaming services, on the other hand, balancing cost increases with customer happiness can be tricky. And Netflix, for one, is under scrutiny from users as it tries to get it right.

Mensah says, “Netflix needs to tread carefully not to take advantage of its established customer base.”

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Write to Megan McCluskey at megan.mccluskey@time.com