accidentally posted new plans to crack down on password sharing for global users. Users aren’t happy, but this is exactly what Wall Street has been looking for.
(ticker: NFLX) has made it clear it needs to address password sharing across multiple households. On Wednesday, the streaming giant accidentally posted on its website for global users its plans to crack down on the issue. The material has since been taken down, but the backlash has already begun with angry customers.
The rules posted on Wednesday said passwords would only be shareable in one household, and
will ask users to connect to the Wi-Fi at their home so the app can recognize the paying user’s primary location. People who don’t live at that location will not be able to log into that account anymore.
These regulations are currently being tested in some Latin American countries, and can be viewed on the Netflix Help Center for those specific locations.
Netflix did not immediately respond to Barron’s request for comment.
Many users went to Twitter after the leak to vent their anger over the post, expressing frustration that these rules are unfair to people who have been paying to share their accounts with family members for years.
Netflix has been clear that this is an important step for it to help increase revenue. The company estimates there are about 100 million households watching Netflix without paying. In the company’s latest earnings call, management said that getting rid of password sharing “will not be a universally popular move, so there will be current members who are unhappy with this move. We’ll see a bit of a cancel reaction to that.”
But the company added that “we’ll see folks come on as new subscribers, essentially borrowers creating their own accounts or incremental monetization through the extra member.”
Wall Street analysts see the benefit of removing password sharing as well.
“We believe password sharing, along with the continued rollout of its AVOD [advertising-based video on demand] service, will drive an acceleration in growth throughout 2023 in revs/subs and beyond,” BofA Securities analyst Jessica Reif Ehrlich wrote in a research note after earnings. She rates the stock Buy, with a $410 price target.
Raymond James analyst Andrew Marok, who rates the stock Market Perform, without a price target, wrote in an earlier research note that results from the testing of Latin American account sharing “suggest that churn from unhappy customers disconnecting the services as a response to account-sharing restrictions is eventually more than offset by the proportion of previously unpaid accounts converting to paying subs.”
Shares of Netflix were down 0.8% in premarket trading to $363.98.
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