Netflix password sharing crackdown: What you need to know

Netflix used to cast a blind eye toward password sharing, but that blind eye is quickly turning into the Eye of Sauron. Soon, Netflix subscribers will have to pay extra to share their accounts with family and friends outside their household. So, when exactly will Netflix begin cracking down on password sharing, and what will happen if you get caught? Here’s what you need to know. Update: February 1, 2023: Netflix briefly posted some changes to its password-sharing FAQ that indicated the company was taking entirely new steps to prevent subscribers from sharing their passwords, but the changes were removed in a subsequent update. The information below is the current state of affairs–at least for U.S. Netflix subscribers. Netflix password sharing crackdown: Your questions answered 1. Why is Netflix cracking down on password sharing? Netflix didn’t always have a problem with subscribers sharing their passwords. As recently as 2016, Netflix CEO Reed Hastings called the practice a “positive thing” because so many password sharers eventually got their own accounts. To be clear, Hastings wasn’t actually encouraging password sharing, but he didn’t seem interested in a crackdown, either, noting that account sharing “really hasn’t been a problem.” Of course, Hastings’ 2016 comments came in the context of explosive subscriber growth for Netflix. By early 2022, that growth had stalled, with Netflix reporting that its subscriber base had shrunk for the first time in a decade. Password sharing was partly to blame, the company said. While Netflix hasn’t quantified how much revenue it may have lost from password sharers, a Los Angeles Times report estimates the practice may have cost streamer and pay-TV operators up to $9.1 billion in 2019, a figure that could balloon to $12.5 billion by 2024. The streaming landscape has also changed dramatically in the past few years. Back in 2016, Hastings could afford to be cavalier about password sharing because the streamer faced little in the way of serious competition. Today, it’s up against the likes of Disney+, HBO Max, Paramount+, Peacock, and Apple TV+. With all the big players fighting tooth-and-nail over new subscribers, streamers like Netflix aren’t giving password sharers a free pass anymore. 2. Is it ever okay to share your Netflix account? According to Netflix’s Help Center, you can only share your Netflix account with people “who live together in a single household.” It’s also fine to use the same Netflix account when you’re traveling or between different homes–for example, if you’re staying at your summer home (lucky you!), you can sign in to your Netflix account there as well as at your regular residence. But if you share your Netflix password–and thus your account–with someone who doesn’t live in your household, that’s a no-no, and it’s clearly spelled out in Netflix’s Terms of Use. 3. How does Netflix know that you’re sharing someone else’s password? Netflix says it uses a combination of IP addresses, device IDs, and “account activity from devices signed into the Netflix account” to determine if an account is being used in the primary account holder’s household. Netflix may also ask you to verify a device by entering a four-digit verification code sent to the account holder. Suffice to say that if you’re sharing someone else’s Netflix account, Netflix can likely detect it. 4. Is Netflix password sharing illegal? Well, that’s a bit of a gray area. The 30-year-old Computer Fraud and Abuse Act (or CFAA) is often cited as a federal law that could make password sharing a crime, and in 2016, the Ninth Circuit Court of Appeals ruled that a particular case of corporate password-sharing was illegal under the CFAA. But as Slate points out, there is “much ambiguity and uncertainty” about the CFAA, and the 2016 Ninth Circuit ruling had nothing to do with sharing streaming passwords. Put another way, ask 10 lawyers whether it’s legal to share your Netflix password and you’ll get 10 different answers. In any event, no one has ever been prosecuted for sharing their Netflix password, or at least not yet. 5. When will Netflix start cracking down on password sharing? Arguably, Netflix has begun its password-sharing crackdown already. Last year, the streamer began a test asking users to verify their Netflix accounts using a four-digit code sent to the account holder. A “verify later” option let users keep streaming even if they didn’t have the code, but still, the test certainly raised eyebrows. Back in March, Netflix’s efforts to stem password sharing became more official, with the company announcing an option for account holders in Chile, Costa Rica, and Peru to create reduced-priced “sub accounts” for up to two people outside their household. Four months later, Netflix took a different tack, rolling out an “add a home” feature that let Netflix subscribers in five Latin America

Feb 2, 2023 - 12:00

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Netflix password sharing crackdown: What you need to know

Netflix password sharing crackdown: Your questions answered

Why is Netflix cracking down on password sharing?

Netflix didn’t always have a problem with subscribers sharing their passwords. As recently as 2016, Netflix CEO Reed Hastings called the practice a “positive thing” because so many password sharers eventually got their own accounts. To be clear, Hastings wasn’t actually encouraging password sharing, but he didn’t seem interested in a crackdown, either, noting that account sharing “really hasn’t been a problem.”

Of course, Hastings’ 2016 comments came in the context of explosive subscriber growth for Netflix. By early 2022, that growth had stalled, with Netflix reporting that its subscriber base had shrunk for the first time in a decade. Password sharing was partly to blame, the company said.

While Netflix hasn’t quantified how much revenue it may have lost from password sharers, a Los Angeles Times report estimates the practice may have cost streamer and pay-TV operators up to $9.1 billion in 2019, a figure that could balloon to $12.5 billion by 2024.

The streaming landscape has also changed dramatically in the past few years. Back in 2016, Hastings could afford to be cavalier about password sharing because the streamer faced little in the way of serious competition. Today, it’s up against the likes of Disney+, HBO Max, Paramount+, Peacock, and Apple TV+.

With all the big players fighting tooth-and-nail over new subscribers, streamers like Netflix aren’t giving password sharers a free pass anymore.

Is it ever okay to share your Netflix account?

According to Netflix’s Help Center, you can only share your Netflix account with people “who live together in a single household.”

It’s also fine to use the same Netflix account when you’re traveling or between different homes–for example, if you’re staying at your summer home (lucky you!), you can sign in to your Netflix account there as well as at your regular residence.

But if you share your Netflix password–and thus your account–with someone who doesn’t live in your household, that’s a no-no, and it’s clearly spelled out in Netflix’s Terms of Use.

How does Netflix know that you’re sharing someone else’s password?

Netflix says it uses a combination of IP addresses, device IDs, and “account activity from devices signed into the Netflix account” to determine if an account is being used in the primary account holder’s household.

Netflix may also ask you to verify a device by entering a four-digit verification code sent to the account holder.

Suffice to say that if you’re sharing someone else’s Netflix account, Netflix can likely detect it.

Is Netflix password sharing illegal?

Well, that’s a bit of a gray area.

The 30-year-old Computer Fraud and Abuse Act (or CFAA) is often cited as a federal law that could make password sharing a crime, and in 2016, the Ninth Circuit Court of Appeals ruled that a particular case of corporate password-sharing was illegal under the CFAA.

But as Slate points out, there is “much ambiguity and uncertainty” about the CFAA, and the 2016 Ninth Circuit ruling had nothing to do with sharing streaming passwords.

Put another way, ask 10 lawyers whether it’s legal to share your Netflix password and you’ll get 10 different answers.

In any event, no one has ever been prosecuted for sharing their Netflix password, or at least not yet.

When will Netflix start cracking down on password sharing?

Arguably, Netflix has begun its password-sharing crackdown already.

Last year, the streamer began a test asking users to verify their Netflix accounts using a four-digit code sent to the account holder. A “verify later” option let users keep streaming even if they didn’t have the code, but still, the test certainly raised eyebrows.

Back in March, Netflix’s efforts to stem password sharing became more official, with the company announcing an option for account holders in Chile, Costa Rica, and Peru to create reduced-priced “sub accounts” for up to two people outside their household.

Four months later, Netflix took a different tack, rolling out an “add a home” feature that let Netflix subscribers in five Latin American countries “buy” more homes in which they–or others–could use the same Netflix account.

And during its third-quarter earnings call in October, Netflix confirmed that it would start charging account sharers starting in “early 2023.”

In a related development, Netflix recently announced a new “Profile Transfer” tool that makes it easy for password sharers to transfer all their Netflix profile data, including their watch lists, histories, and recommendations, to a new account.

How will the Netflix password crackdown work?

With its recent tests, Netflix has given us some hints on how it might crack down on password sharers–namely, a combination of asking users to verify their accounts plus options for account holders to pay extra to share their accounts with others outside the household.

Here’s a little more, taken directly from Netflix’s Q3 2022 report:

After listening to consumer feedback, we are going to offer the ability for borrowers to transfer their Netflix profile to their own account, and for sharers to manage their devices more easily and to create sub-accounts (“extra member”), if they want to pay for family or friends.

When it comes to the stick, it’s likely Netflix will begin blocking the streams of password sharers who can’t verify their accounts or who aren’t streaming under the “sub-account” of a paying subscriber.

How much will it cost to share your Netflix account?

Netflix hasn’t specified how much it will charge for sub-accounts, although (as Engadget notes) the fee in its pilot programs was roughly a quarter that of the standard subscription rate.

That means it’s possible that a Netflix user who pays $20 a month for a Premium subscription might pay, say, about $5 for each sub-account. (Engadget pegs the fee at “around US$3-4” per sub-account.)

But again, that’s just conjecture. Presumably we’ll get more details on how much Netflix will charge account sharers sometime next year.