Netflix's much anticipated password-sharing clampdown has finally arrived in the US.
On Tuesday, the streaming giant announced it intended to crack down on password sharing by charging US subscribers $8 to add another user to their account. The charge only applies to someone living outside an account holder's household.
Netflix first hinted at a crackdown on password sharing in July after it suffered its first subscriber loss in over a decade during the first quarter of 2022.
The move has been unpopular with Netflix subscribers around the world.
Even before the plans were enforced, the proposed ban was met with fierce backlash from some customers, several of whom threatened to cancel their accounts when the rules were brought in.
The policy has already been rolled out in several countries but research indicates that scores of customers have already gone on a canceling spree.
Citing research from Kantar, Bloomberg reported that Netflix lost more than one million users in Spain, where password-sharing rules were enforced in early February, during the first three months of 2023. Subscription cancellations in the first quarter tripled compared with the previous period, per Kantar's research.
The reaction is not entirely unexpected. In an earnings call in January, Netflix co-CEO Greg Peters said the company was expecting to see "a bit of a cancel reaction" to the policy. In its first-quarter earnings release on April 18, Netflix said the company expected the dip to be temporary before "borrowers" started signing up for their own accounts.
How it works
Netflix has said it can detect when passwords are shared outside a household, which it defines as people who live in the same location as the account owner.
The company previously said it used a combination of IP addresses and device IDs to determine if an account was being used in the correct location. If users want to share their account with someone outside their household they can buy an "extra member" and add them to the account, according to Netflix's help center. This feature is only available in some countries.
Paid sharing was initially tested in Costa Rica, Chile, and Peru, where it costs the equivalent of around $2 to $3 to add an extra member account.
This was later extended to include New Zealand, Canada, Spain, and Portugal.
The extra member prices differ across countries. In New Zealand, the service costs NZ$7.99 ($5.09) per month, in Canada it costs CAN$ 7.99 ($5.96) per month. In Spain, the service costs 5.99 euros ($6.45), and in Portugal, it's 3.99 euros ($4.30).
The company has compared Canada's reaction to the new policy with what it hopes to achieve in the US.
"In Canada, which we believe is a reliable predictor for the US, our paid membership base is now larger than prior to the launch of paid sharing and revenue 4 growth has accelerated and is now growing faster than in the US," the company said in a letter to shareholders after its first-quarter earnings release.
Netflix has tested other rules aimed at stamping out password-sharing, including temporary-access codes for traveling, Insider previously reported.
