Netflix Password Sharing Crackdown: Here's Why It's A Big Deal

A new effort by Netflix Inc NFLX has received a thumbs up from a prominent analyst. The streaming service is starting to crackdown on password sharing by determining if viewers share a household with the account owner.

What Happened: Netflix’s standard plan costs $13.99 per month and enables users to simultaneously watch the streaming service on two screens at a time, while the $17.99 premium plans provide the ability for simultaneous viewing on up to four separate screens.

The multiple viewing options enables subscribers to share their accounts with family or friends.

Netflix has begun testing a new policy on accounts where multiple viewing screens are open by asking users to confirm if they live with the account owner. Confirmation is given by entering details from a text message or email sent to the account owner, and those who do not confirm are asked them to sign up for a separate account if they are not living with the subscriber.

Although viewers have the ability to delay the verification, the confirmation request may appear the next time they open Netflix, and viewers who keep refusing confirmation will be required to open a new account to continue streaming.

At the moment, the test is only being conducted with viewers watching Netflix programs on televisions.

“This test is designed to help ensure that people using Netflix accounts are authorized to do so,” a Netflix spokesperson said.

What Happened Next: Netflix’s test earned praise from Nat Schindler, research analyst at Bank of America Securities, acknowledging the company has done little to crack down on password sharing, and this gives an incorrect consideration of its full audience.

“Netflix has around 204M paid subscribers and added 37M new subscribers last year but according to our survey, the actual number of Netflix users could be a lot higher,” Schindler wrote in a new research paper. “In our streaming survey, we asked a pool of Netflix subscribers if they shared the service with another household. 26% said they did and 50% of these said it was shared with family in multiple locations.”

Schindler continued that a password crackdown by Netflix will result in “a boost to net subscriber adds.” He also recommended complementing this action with “new pricing strategies, such as introducing new plan tiers to cater to price-sensitive consumers.”

Schindler added he was maintaining a Buy rating for Netflix at $680 price target. At last check, shares of Netflix were trading at 512.77, down 1.97%.

(Photo by Stock Catalog/Flickr)