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Netflix bosses gave an update Tuesday on the streamer’s password-sharing crackdown efforts.
During a quarterly earnings interview, Fidelity’s Nidhi Gupta asked the company’s top executives about their recent strategy to test blocking users who are suspected of using other people’s passwords. Specifically, Gupta asked about the size of the opportunity to increase the company’s revenue with the effort and why now is the right time to start “tightening the screws on that.”
“Nidhi, we test many things, but we would never roll something out that feels like ‘turning the screws,’ as you said,” co-founder and CEO Reed Hastings said. “It has got to feel like it makes sense to consumers, that they understand. And Greg’s been doing a lot of great research trying variants that harmonize with the way consumers think about it.”
That said, Netflix is nonetheless testing blocking password sharing for potential wider rollout.
“We recognize our members are in a different position and have different needs from us as an entertainment service and we’re seeking that flexible approach to make sure that we are providing the plan with the right features and the right price points to meet those needs,” COO and chief product officer Greg Peters said. “We’re going to keep doing that, keep working on accessibility across all the countries we service. But while we’re doing that, we want to make sure that people who are using a Netflix account, who are accessing it, are authorized to do so — and that’s what this line of testing is about. It’s not necessarily a new thing. We’ve been doing this for awhile, so you may see it pop up here and there in different ways. But it’s the same framework that we use in [terms of] how we think about continuously improving the service … we use the test and test results to inform and guide how we produced and continue to make it better and better.”
Gupta followed up by asking if there are any markets where the subscriber to user ratio is particularly high (in other words, if some countries have more illicit password sharing than others). Peters didn’t take that bait and offer up specific countries, but answered more generally: “Every country is different. We see different ranges of behavior. How people orient themselves to the service is different. It’s more than just how they think about how maybe they’re working the system, but how they’re thinking of sharing the service with extended family, or people who they love, is a natural part of how they connect with the stories we’re telling. It’s different around the planet — and different within countries, too … [the testing] is mostly about letting our members speak to us about what’s really the ideal model for them.”
The news came as Netflix missed its projected subscriber forecast for the quarter, adding just 4 million customers in early 2021, a slip that executives attributed to the novel coronavirus pandemic shutting down so many productions worldwide.
In March, the streamer began throwing up a roadblock to viewers who were suspected of using somebody else’s login credentials. “If you don’t live with the owner of this account, you need your own account to keep watching,” read the screen.
“This test is designed to help ensure that people using Netflix accounts are authorized to do so,” a Netflix spokesperson said at the time.
In order to continue watching, the viewer is given the option of either verifying their identity (with a texted or emailed code to the account’s owner), or opting to “verify later,” which gives the viewer an unspecified additional amount of time to continue watching and later confirm they are a valid account user.
A source familiar with the tests said the extent of the rollout varied from country to country, but noted that one reason for the feature is a desire to help protect subscribers from security concerns that can arise from unauthorized use of their account.
The move potentially represented the beginning of a strategy shift by Netflix, which has historically not attempted to police password sharing. “Password sharing is something you have to learn to live with,” Netflix CEO Reed Hastings declared in 2016, “because there’s so much legitimate password sharing — like you sharing with your spouse, with your kids … so there’s no bright line, and we’re doing fine as is.”
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