NETFLIX is cracking down on password sharing and an additional charge is in play.
The company has long turned a blind eye to password sharing but a dip in new customers and a stock price downturn is forcing an internal reaction.
Netflix was founded by Reed Hastings and Marc Randolph in 1997 as a DVD-by-mail service.
The company pivoted to streaming in 2007 and have racked up over 220million subscribers – making them the largest subscription-based streaming service and one of the instigators of the cord-cutting movement.
Netflix is still led by Hastings – who is adorned with Silicon Valley badges of honor including a Masters' degree from Stanford, a billion-dollar net worth and eight-year stint on Facebook's board of directors.
But on April 19, Hastings had bad news for all the people using the service for free with an ex's password.
Netflix is planning to impose "password sharing fees" – an additional cost that allows paying subscribers to an additional account for someone outside their home for just $2.99.
The company started testing the additional fees in Central America last year – reporting by Variety says members are asked to verify accounts outside of their home to weed out customers getting freebies.
A letter to the shareholders letter puts a positive spin on appealing to users who have been sneaking the service for free, writing "this is a big opportunity…these households are already watching Netflix and enjoying our service."
Another alternative is to create a cheaper ad-based tier – an idea Hastings previously railed against but conceded would benefit "consumer choice" in a recorded interview.
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Netflix has been able to shrug off users getting around paying because they had been on decade-long run of continuously increasing subscribers – until this quarter.
According to the New York Times, Netflix lost 200,000 subscribers this quarter and expects to lose 2million more by the end of the next.
In the letter to shareholders, Netflix said 100million users worldwide are getting by without paying via password sharing.
Netflix's stock has been in free fall since the shareholder's report, dropping almost 35% from $348 to about $213 a share – its lowest price in five years.
External factors have contributed to the decline – the service suspended operations in Russia in response to the Ukraine war, costing the company 700,000 subscribers.
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Competition from other streamers like Disney+ and Paramount+ have also helped force Netflix's hand.
Ultimately, Netflix is just seeking what they're owed – providing a service is one thing, collecting payments and managing the public response to new fees is another.
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