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Netflix reveals first details of password sharing crackdown

Netflix (NFLX) has revealed the first details of its password sharing crackdown.

According to the streaming giant's help center, which updated its FAQ pages for countries currently in the midst of the crackdown (Chile, Costa Rica, and Peru), Netflix accounts will remain shareable but only within one household. (The U.S. may be next up in the first quarter.)

As a result, Netflix will require users to identify a "primary location" for all accounts that live within the same household. Users will need sign into the home wifi of the primary location at least once every 31 days to ensure their device is not blocked.

The company said it will use information such as IP addresses, device IDs, and account activity to determine whether a device signed into the account is connected to the primary location.

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When someone signs into the account from a device that is not part of the primary location, or if the account is accessed persistently from another location, it will likely be blocked.

To bypass this, the main account holder will need to verify the device through a temporary code. Once verified, the traveling member can watch Netflix for seven consecutive days. It’s unclear if you can request multiple temporary codes following the seven-day period to avoid paying for an additional account.

Bangkok, Thailand - April 25, 2022 : iPhone 13 showing its screen with Netflix application.
Bangkok, Thailand - April 25, 2022 : iPhone 13 showing its screen with Netflix application. (Wachiwit via Getty Images)

Netflix warned in the its quarterly letter to shareholders it will be intensifying its push to combat password sharing.

"Later in Q1, we expect to start rolling out paid sharing more broadly. Today’s widespread account sharing (100M+ households) undermines our long term ability to invest in and improve Netflix, as well as build our business," the company said.

Coupled with a crackdown on password sharing, Netflix will also rely on its newly launched ad-supported tier to lift profitability, especially as competition within the streaming space escalates: "As always, our north stars remain pleasing our members and building even greater profitability over time."

According to The Information, Netflix told advertisers it saw a doubling of sign-ups for its ad tier in January versus December — a positive sign of subscriber momentum as the streamer looks to invigorate revenue.

Netflix reported net additions of 7.66 million in Q4, above company guidance of 4.5 million amid a slew of high-profile and record-breaking content releases, including "Glass Onion," "Troll," "All Quiet on the Western Front," "My Name is Vendetta," and "Wednesday."

The company also announced co-CEO and co-founder Reed Hastings would step down from his role leading the company, with COO Greg Peters will join current Netflix co-CEO Ted Sarandos in that role. Hastings will now serve as the company's executive chairman.

Netflix stock has been on a tear in recent weeks, up roughly 55% over the past six months with about a 20% gain so far in January, far outpacing the Nasdaq Composite's 3% dip.

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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