Netflix runs trial crackdown on password sharing in Peru, Chile and Costa Rica

Latin American users blasted Netflix‘s ‘confusing’ extra charges after the streaming platform confirmed it was trialing a new password-sharing policy.

The streaming giant announced the new password-sharing policy in Peru, Chile, and Costa Rica.

Netflix lost subscribers for the first time in a decade in April, causing its stock to plunge by 72% over a six-month period, hitting a price of below $200 for the first time since late 2017.

The streaming giant has laid off around 150 most US-based workers after earnings reports showed its growth had slowed relative to expectations, with some analysist suggesting its subscriber numbers had peaked. 

Central and South America is one of the lowest earning regions for Netflix, according to Statistica, making it particularly vulnerable to price changes but representing a lower risk should the company lose subscribers after the trial.

The streaming service company is targeting countries outside the bigger markets ‘so they don’t potentially suffer a large amount of subscriber goodwill lost,’ Paul Erickson, a streaming market analyst from the firm Parks Associates, was quoted saying in Rest of World.

Netflix is not testing the new policy in the region’s largest streaming markets, such as Brazil and Mexico, marking a strategic gambit for the company.

Netflix’s terms of use states that subscribers are not allowed to share accounts outside of their household, but approximately 33% of Netflix subscriptions are shared outside the household, while only 3% are used by multiple households that share the cost of the subscription, according to Leichtman Research Group. 

In Peru, subscribers can add up to two additional users who they don’t live with for about 8 soles, the equivalent of around $2, per month each.

The option is cheaper than setting up a new account, which costs 24.90 soles, around $6.80, per month on a basic plan.

But users speaking with Rest of World said the new rules did not apply equally, with many being prevented from sharing passwords while other users were let off the hook.

Others said they cancelled their Netflix accounts outright when the new charges came in, citing the lack of clarity around how Netflix decides what counts as a ‘household’.

Rest of World also reported that Netflix employees in Latin America charged with handling customer complaints were themselves still sharing their Netflix account with friends and relatives outside their household without facing extra charges.

Peru’s consumer agency said in a press release that Netflix should create clearer channels of communication about the policy with customers.

The company said the rollout had been progressive, meaning that different subscribers may have ended up paying differing charges at different points in time. 

Netflix may also be testing different versions of the rollout on different customers as part of the trial.

Competitors HBO Max, Amazon Prime, and Star+ subscriptions still allow accounts to be shared.

While Netflix’s growth figures have been disappointing to the company, other analysts say Netflix has weathered such economic storms before.

CEO Ted Sarandos, who was chief content officer in 2011, recalled how the stock fell 75% when the company’s founder created a separate company called Qwikster to handle the DVD business.

‘It was horrifying, disappointing and embarrassing,’ Sarandos told The New York Times. ‘How much time do you spend licking your wounds?’ he asked, adding: ‘Let’s have that burned into our memory, but we’ve got to move on and move fast.’

Sarandos is a strong advocate for passport control, believing it necessary to shore-up the company’s future. 

Sarandos was in the video rental business which became completely disrupted with the rise of DVDs, a technology now largely replaced by streaming services like Netflix. 

In 2020, Sarandos decided to oust Cindy Holland, his vice president of original content who had developed big Netflix hits such as ‘House of Cards’, ‘Orange Is the New Black,’ ‘Stranger Things,’ ‘The Crown’ and ‘The Queen’s Gambit’. 

The company added 10 million subscribers in the first three months of the Covid-19  pandemic.

Netflix seems to have hit a ceiling of 220 million subscribers, with the stock peaking above $700 a share in November 2021. 

But the company has overcome challenges before. It has the most viewers of any streamer, but accounted for just 6.6 percent of all TV viewership in the United States.