Netflix's Early Password-Sharing Crackdown Tests Termed 'A Mess'

Netflix’s initial experiment with implementing fees for sharing passwords outside of subscribers’ households, launched in March in Peru, Chile and Costa Rica, are so far proving a confusing “mess” that has already drawn the attention of consumer protection agencies, according to a new report. 

In informal interviews with more than a dozen Netflix subscribers in Peru two months after the public policy announcement, tech site Rest of World found that messaging, enforcement and fees have been inconsistent. 

Some subscribers said they had been charged extra and cancelled their subscriptions as a result, while others claimed that have been able to continue to share their accounts across households (with or without some kind of notification from Netflix) without facing enforcement. 

Overall, “the lack of clarity around how Netflix determines a ‘household’ and the differing charges levied on different customers have left subscribers in the trial confused, risking action from consumer regulators,” according to the report

An anonymous Netflix customer service rep told the tech site that reps are also confused about the policy, and that subscribers who called to argue that their account was being used by a household member at a location outside of their home were given verification codes that exempted them from the extra charges. 

Netflix told Rest of World that it realizes that some subscribers associate “household” with immediate family members, but that the company has always defined the term as people living in the same physical location. Netflix also said that the rollout has been “progressive,” and different subscribers may currently be paying different charges. 

Meanwhile, last month, representatives of the national consumer protection agencies for Peru, Chile and Costa Rica met with Netflix to “voice concerns,” followed by a press release from Peru’s agency recommending that the streaming service establish clearer channels of communication about the policy and define “household” more clearly to avoid a rash of consumer complaints. 

None of the agencies appear to have launched formal investigations as yet. 

Netflix currently has the largest streaming share in Peru (about 41% to 20% each for Disney+ and HBO Max, per Ampere Analysis). 

The markets chosen for the test have among Netflix’s lowest prices and average revenue per user (ARPU) stats. 

In Peru, subscribers can share an account with up to two people outside of their own physical household locations by paying about $2 per month (8 soles) per extra user. Creating a new account on the streamer’s basic plan costs about $6.80 per month. 

Netflix reportedly hopes to roll out the password sharing crackdown to all of its markets by year’s end. 

For now, other streaming services “are going to wait for Netflix to bloody [its] nose” before trying to tackle password sharing themselves, Paul Erickson, streaming market analyst for Parks Associates, noted to the tech site.

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