Netflix has started opening the curtain on how it plans to enforce its ban on password sharing. And it’s using methods that might make privacy advocates and frequent travelers uncomfortable.
The streaming service, which used to actively encourage people to share their passwords, now estimates that over 100 million users are essentially watching for free, which is starting to make an impact on revenue. And by the end of March, it says, the free ride will be over.
“Today’s widespread account sharing (100M+ households) undermines our long term ability to invest in and improve Netflix, as well as build our business,” the company wrote in a recent letter to shareholders. “While our terms of use limit use of Netflix to a household, we recognize this is a change for members who share their account more broadly. So we’ve worked hard to build additional new features that improve the Netflix experience, including the ability for members to review which devices are using their account and to transfer a profile to a new account.”
On Wednesday, the Netflix Help Center in Peru began revealing how the company planned to monitor account sharing. (Netflix is testing the new policy in the country and will roll it out to other markets in the coming weeks). And one big tool will be location tracking.
“When a device outside of your household signs in to an account or is used persistently, we may ask you to verify that device before it can be used to watch Netflix,” the company wrote. “We do this to confirm that the device using the account is authorized to do so. … Netflix uses information such as IP addresses, device IDs, and account activity to determine whether a device signed into your account is connected at your primary location “
Devices outside of what Netflix determines to be the primary location, which is associated with your home Wi-Fi network, may be blocked from watching the streaming service.
That raises questions for people who watch Netflix while on the road, logging into their account on a hotel television, for example.
Netflix said subscribers can request a temporary code, which will allow them to access the service for seven days if they are traveling or find themselves locked out. They can also update their primary location if it has changed. And paid subscribers, along with anyone who lives with them, will continue to receive uninterrupted access as long as they connect to the Wi-Fi at their primary location at least once every 31 days.
That, of course, seemingly sets up a loophole for some subscription-dodgers. While it might prevent exes from continuing to sponge off of accounts, those who are sharing with friends can apparently have them over to log in once a month to keep the gravy train running. While it won’t help if they want to watch on their big screen TV, they should be able to continue watching on mobile devices.
Some users might be tempted to skirt the rules by using a VPN, but that’s likely to make things worse, since the VPN will change the device’s IP address to another country, making it appear a nonsubscriber is attempting to access the account.
Subscribers will also have the option to add people outside of their household to their account—for an additional fee. The price on that in the U.S. has not been announced, but Latin American users are being charged an extra $2.99 per month to do so.
Password sharing could cost the industry up to $25 billion a year, according to a Citibank report, with Netflix losing $6 billion per year. To account for the losses, Netflix increased its subscription fees last year and it recently introduced an ad-supported model with a lower monthly cost.
Recognize your brand’s excellence by applying to this year’s Brands That Matter Awards before the early-rate deadline, May 3.
