Netflix’s (NFLX) has begun its password sharing crackdown in the US.
The company broke the news in a blog post in which it revealed it would also be performing the crackdown across all other regions in the world, such as the UK, France, Germany, Mexico, Brazil, Singapore, and Australia, among others.
In the post, the company wrote, “Netflix account is for use by one household. Everyone living in that household can use Netflix wherever they are — at home, on the go, on holiday — and take advantage of new features like Transfer Profile and Manage Access and Devices.”
Although the company says anyone within a household can use Netflix on any device they own, anywhere they go, the company plans to use the IP address of devices, account activity, wifi networks accessed, and device IDs to determine who is in a registered household. Those determined to not be in a household will see their access to Netflix content shut off.
In February, Netflix began to broaden its crackdown, including countries such as Canada, New Zealand, Portugal, and Spain, in addition to the test countries of Chile, Costa Rica, and Peru. It had announced that this quarter would see a “broad rollout” of the crackdown to other regions.
Netflix said it will offer the following features to users who share Netflix outside their household to give them more choices and control:
Manage Devices: Visit Manage Account Access page to review which devices are signed in to your account and sign out those you don’t want to have access.
Transfer a profile. Anyone on your account can transfer a profile to a new membership that they pay for.
Buy an extra member. You can share your Netflix account with someone who doesn’t live with you for $7.99/month more.
Netflix shares were up following the announcement, but then sank 2%. Investors worry the crackdown may alienate users.
Still, Wall Street analysts are upbeat about the initiative, seeing it as a long-term driver of growth, which will increase profits alongside the newly-launched ad-supported tier.
In an note to clients last month, Jeffries wrote, “We expect a lot of noise in 2Q23, and are being very conservative in our own modeling of churn in response to password crackdown.”
“However, we believe most of that churn will be somewhat impulsive, as it has minimal impact on the existing subscriber, and those members will return to the service over the course of 2023.”
Jeffries’ recommendation is “buying any dip associated with a conservative 2Q23 guide,” since it is expected Netflix is positioned to be the top video content distributor due to these longer-term revenue drivers, as the company’s budgetary discipline with respect to content will “jumpstart” margin and expansion efforts with respect to free cash flow.
