Get ready for an universal password sharing crackdown

The results are in: Forcing people to stop sharing streaming passwords is working. That’s according to Netflix, which began to enforce new paid sharing rules in 100 countries in May (the company would prefer journalists don't call this a crackdown on account sharing, but that’s effectively what it is).

And guess what? The backlash that some had predicted never materialized. Instead, Netflix actually grew as a result of these new measures, adding 5.9 million subscribers in Q2 (compared to a loss of close to 1 million subscribers in Q2 of 2022).

“The cancel reaction was low and while we’re still in the early stages of monetization, we’re seeing healthy conversion of borrower households into full paying Netflix memberships as well as the uptake of our extra member feature,” the company wrote in its letter to investors Wednesday. “We are revenue and paid membership positive vs. prior to the launch of paid sharing across every region in our latest launch.”

“We’re seeing that it’s working,” said Netflix co-CEO Greg Peters during Wednesday’s call, while also cautioning that the full effect likely wouldn’t be visible for months to come. That’s in part because Netflix hasn’t cut off many sharers yet, including those only accessing the service on mobile devices. “We’ll see those interventions broaden,” Peters added.

Peters also cautioned that it was wrong to just lump all password sharers into one group. “Some borrowers are using the service every day. Those folks are very likely to transfer to their own accounts very soon,” he said. That’s not only good for Netflix in terms of overall subscriber numbers, but those subscribers also are already familiar with the service, making them less likely to cancel in the future. Others were only occasional viewers, and it may take the company longer to convince them to actually pay for access, Peters said.

The bottom line: Despite this only being early results, Netflix’s success with paid sharing will inevitably drive other streaming services to crack down on password sharing as well. We’ve already seen YouTube TV take steps in that direction, and Disney+ has surveyed members about password sharing in the past. With streaming services feeling the heat on controlling costs, Netflix is showing them an easy way to grow their user base.

Then again, Disney+, Peacock and Max aren’t Netflix, which also means they don’t have the same army of developers to obsess over every single feature. When Netflix began pushing back against freeloaders, it also rolled out new features that make transitioning from a mooched to a paid account easier. “We worked really hard over 1.5 years to find an approach that we thought was a good product experience,” Peters said. That work does indeed seem to be paying off.

A version of this article was first published as part of Lowpass, a weekly newsletter about AR, VR, streaming and more. Sign up now for free.

Photo by Mufid Majnun on Unsplash.