The latest on Netflix's password-sharing crackdown

The days of password sharing are coming to an end at Netflix. After the streaming giant started testing ways to crack down on password sharing in Chile, Costa Rica and Peru last year, the new restrictions are officially headed to the United States. Netflix's terms of service have long stated that a user's account "may not be shared with individuals beyond [their] household," but the streamer now plans to actually enforce this by prompting subscribers to pay more to share their accounts with people who don't live with them.

So how will this password-sharing crackdown work, and how much more will subscribers be asked to pay?

How much will it cost to share a Netflix account?

The streaming giant stated that going forward it will cost U.S. subscribers an additional $7.99 a month to share the service with someone who doesn't live in their household. This additional fee will allow subscribers to add an "extra member" to their account.

"An extra member will have their own profile, account and password, but their membership will be paid for by the person who invited them to join," Netflix explained.

But Netflix said subscribers to the standard subscription tier may only add a single extra member. To add up to two extra members, you'll need to subscribe to the more expensive premium tier, and both extra members will cost $7.99 a month each. Subscribers to the basic or ad-supported plans can't add any extra members.

Another option is for users watching on someone else's account to transfer their profile to a new account while keeping their viewing history, list and recommendations.

Are there differences between a Netflix "extra member" account and a regular account?

According to Netflix, being an "extra member" on an existing account won't be exactly the same as having a regular account. For example, extra members can only watch Netflix on one device at a time, they can only download content on one phone or tablet at a time, and they can only have one profile. Also, "extra members must activate their account in the same country associated with the account owner's," Netflix announced.

How can Netflix tell where a user's household is?

Netflix stated it uses "information such as IP addresses, device IDs and account activity to determine whether a device signed into your account is part of" your household. Users can set where their household is by selecting the "manage Netflix household" option under "get help" within Netflix. If a household hasn't been set, "we will automatically set one for you based on IP address, device IDs and account activity," Netflix added.

How will Netflix enforce its password-sharing crackdown?

Netflix has started emailing members who are sharing an account with people outside their households, prompting them to add an extra member. According to Variety, Netflix plans to "block devices that it detects are being used by someone outside the account holder's primary residence after a certain number of days." The Wall Street Journal previously reported that Netflix was considering a plan where password borrowers would continue getting prompted to enter a verification code sent to the owner of the account until that owner pays more.

In late January, however, The Streamable reported a help center page indicated Netflix would require users to "connect to the Wi-Fi at your primary location, open the Netflix app or website and watch something at least once every 31 days" to continue having access to the service on that device. "When someone signs into your account from a device that is not part of your primary location, that device may be blocked from watching Netflix," the page also stated. But Netflix clarified this information was "only applicable to Chile, Costa Rica and Peru" and went live in other countries by mistake. It was subsequently removed.

Does this mean I won't be able to watch Netflix while traveling?

In a shareholder letter, Netflix clarified that "all members will be able to watch while traveling, whether on a TV or mobile device," even after the password-sharing crackdown is rolled out. Also, when Netflix ran a test cracking down on password sharing in five Latin American countries, streaming on mobile devices, tablets or laptops wasn't affected, Bloomberg reported.

"Members can still easily watch Netflix on their personal devices or log into a new TV, like at a hotel or holiday rental," Netflix stated.

How common is password sharing?

Netflix said in 2022 that more than 100 million households don't pay for the service due to password sharing. The company didn't seem to care about this for years and at times even encouraged account sharing. "Love is sharing a password," Netflix once famously declared on Twitter.

But this attitude has come to an end. Netflix Chief Product Officer Greg Peters said in April 2022 that the company is "not trying to shut down" account sharing completely, but it's looking for ways to make money off these viewers who aren't paying anything.

Why is Netflix doing this?

Netflix announced its plan to crack down on password sharing after it lost subscribers for the first time in more than a decade — 200,000 of them. The company said this could partially be blamed on losses from suspending service in Russia amid the war in Ukraine. But the earnings report still stunned analysts, as Netflix had projected it would gain 2.5 million subscribers that quarter, so the company's stock took a dive.

Seeking to quickly assure shareholders it was taking action to boost revenue, Netflix said it was working on "more effective monetization of multihousehold sharing." Since then, Netflix bounced back and returned to adding subscribers. But the company remains focused on growing revenue, emphasizing this as its most important metric over subscriber growth. Netflix's other plan for growing revenue was introducing a new ad-supported subscription tier, which launched in 2022 for $6.99 per month.

Will the crackdown work?

Some analysts "see an influx of several billion dollars in new revenue" if Netflix can successfully roll out its password crackdown, Deadline reported. In January 2023, between "launching paid sharing and building our ads offering," Netflix stated, "we believe we have a clear path to reaccelerate our revenue growth."

Netflix has admitted, though, that some users will likely cancel their accounts rather than pay more. "From our experience in Latin America, we expect some cancel reaction in each market when we roll out paid sharing, which impacts near-term member growth," according to the company. But Netflix told shareholders that "as borrower households begin to activate their own standalone accounts and extra member accounts are added, we expect to see improved overall revenue."

Updated May 25, 2023: This story has been updated throughout.

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