Netflix: Password sharing 'undermines' business, warns crackdown will intensify

Netflix (NFLX) freeloaders, beware! The company is ramping up its password sharing crackdown.

Following fourth quarter earnings results on Thursday that saw subscriber numbers leap past expectations, the company warned in its quarterly letter to shareholders it will be intensifying its push to combat password sharing.

"Later in Q1, we expect to start rolling out paid sharing more broadly. Today’s widespread account sharing (100M+ households) undermines our long term ability to invest in and improve Netflix, as well as build our business," Netflix said.

The company explained it's been building additional new features to improve the overall Netflix experience, including the ability for members to review which devices are using their account and to transfer a profile to a new account.

Members can also pay extra if they want to share the platform with people they don't live with.

"As we work through this transition – and as some borrowers stop watching either because they don’t convert to extra members or full paying accounts – near term engagement, as measured by third parties like Nielsen’s The Gauge, could be negatively impacted," Netflix said.

However, the company referred to its recent testing in Latin America, which showed engagement steadily increase over time as borrowers signed up for their own accounts and new content was released.

Netflix to ramp up password sharing crackdown
Netflix to ramp up password sharing crackdown (wutwhanfoto via Getty Images)

Investors will be closely monitoring the company's earnings call for additional updates regarding its crackdown on password sharing, in addition to its newly launched ad-supported tier.

Netflix has looked at those two initiatives as profitability drivers, especially as competition within the streaming space escalates: "As always, our north stars remain pleasing our members and building even greater profitability over time," the streamer said.

Quarterly net additions grew by 7.66 million, above company guidance of 4.5 million amid a slew of high-profile and record-breaking content releases, including "Glass Onion," "Troll," "All Quiet on the Western Front," "My Name is Vendetta," and "Wednesday."

The company reported revenue and earnings per share for the fourth quarter that were light of estimates, as revenue totaled $7.85 billion against forecasts for $7.86 billion, while earnings per share came in at $0.12 against $0.58 expected.

For the current quarter, Netflix expects revenues will total $8.17 billion with earnings per share forecast to total $2.82. Netflix no longer offers subscriber growth forecasts.

The company also announced co-CEO and co-founder Reed Hastings would step down from his role leading the company, with COO Greg Peters will join current Netflix co-CEO Ted Sarandos in that role. Hastings will now serve as the company's executive chairman.

Shares of Netflix were up as much as 6% in after-hours trading following Thursday's results.

Netflix stock have been on a tear in recent weeks, up roughly 60% over the past six months with about a 10% gain so far in January, outperforming the Nasdaq Composite's 5% gain.

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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