Netflix’s password crackdown trial has a hidden sting

Netflix is forging ahead with its password crackdown, but there’s a hidden detail in how it might work that’s going to annoy a lot of customers.

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It’s a good thing Netflix is still in trials over how its password sharing crackdown will work because there’s one aspect in its latest proposals that will trip up a lot of its straight-and-narrow customers.

From August, the streaming service will roll out the second format of its move to charge subscribers an extra amount for sharing their password, and one of the details will end up slugging some customers who are already doing the correct thing.

The first test it ran was in Peru, Costa Rica and Chile and it charged users to add extra members to their accounts who were outside of their residence.

The next format it’s trialling will be in Argentina, Dominican Republic, El Salvador, Guatemala and Honduras and it’s predicated on “adding a home” to an existing account.

Under this proposal, your Netflix account isn’t just locked to the subscriber but to the subscriber’s primary residence. This means you can’t use your own login details at, for example, a holiday home.

If you have a secondary residence to which you decamp over school breaks or during public holidays, you can’t use your Netflix login details without paying extra to add that “home” to your existing account.

The same goes if you’re merely on holidays and hired out a place for more than two weeks.

Under the new regime, you can only transport your own account to another location for two weeks and only once per year for that location. So you can’t spread out those 14 days over a few visits to that beach shack.

This only applies to Netflix accessed through a TV, and most likely also includes third-party set-top boxes such as an Apple TV puck, Chromecast or Firestick. The restrictions won’t apply to laptops or mobile and tablet devices.

You may have to pay extra to stream The Gray Man in your holiday home. Picture: Stanislav Honzik/Netflix

You could make the argument that anyone who’s fortunate enough to either have a holiday home or can afford to hire out a house for a two-weeks-plus break could cop the extra few bucks without becoming destitute.

It’s more about the fact that those affected customers may very well have been part of the 120 million accounts who weren’t violating the streamer’s terms and conditions by passing on their login details, and now have to pay extra (roughly $4) for something they were already entitled to.

Of course, this is all still in testing and the data may very well reveal pain points around exactly this particular restriction. So it may not come to pass when the crackdown is introduced globally in 2023.

And Netflix is a private business which has every right to enforce its terms of sale, which means recouping revenue lost through password sharing.

But if it restrictions are too onerous, Netflix may find that it will push well-intentioned customers to cancel. It’s a fine line.

The streamer has allowed, albeit not explicitly, password sharing for years, admitting it wasn’t a priority when it was still in its aggressive growth phase.

But now that growth has not just slowed down but gone backwards – two consecutive quarters of subscriber loss – the company is getting serious about password sharing.

Last week, Netflix revealed it lost 970,000 accounts in the three months to June, which was significantly fewer subscribers than it had previously forecast. The better-than-expected news led to a resurgence in its stock price.

Netflix added 1.1 million accounts in Asia-Pacific, the region under which Australia sits.