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Thursday, April 15, 2021

Explained: Why Netflix is cracking down on password sharing

Netflix’s terms and services state that the account is for personal and non-commercial use with passwords not meant to be shared with individuals beyond the household.

Written by Nandni Mahajan , Edited by Explained Desk |
Updated: April 3, 2021 10:28:01 am
Netflix is actively trying to ensure that customers are paying for the services. (Pixabay/File Photo)

In 2020, the world’s most popular streaming service Netflix gained almost 37 million new subscribers due to the global pandemic and hit shows like Tiger King and Money Heist. Netflix also reported a revenue of $25 billion and profit of almost $2.8 billion.

Despite the success, Netflix also seems to be clamping down on pilferage on the platform. Earlier this month some users got the message, “If you don’t live with the owner of this account, you need your account to keep watching.” Users are then required to verify their account through two-factor authentication via a code sent to the account holders phone or email.

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A spokesperson said the test, the first of its kind to plug password sharing, is to ensure that accounts are being used by people who are authorised to do so. The test currently remains in a trail stage and the company is yet to make a decision on its rollout.

Why is Netflix doing this?

Netflix’s terms and services state that the account is for personal and non-commercial use with passwords not meant to be shared with individuals beyond the household. However, they recognise that password sharing is endemic and it is unclear how many users use the platform in violation of its terms and conditions.

In 2019, Netflix product head Greg Peters had acknowledged the issue of password sharing — most users share passwords with their friends and family. While t’s hard to control further password sharing and new device authorisation because of this, there is also the risk to the original customer’s privacy and digital security.

The two-factor authentication allows users to share the codes and while it can be a slight inconvenience, it ensures that the main account holder is aware that their account is being used by someone they have authorised.

But why now?

Password sharing is not new to Netflix or any other subscription-based website. Then why is Netflix taking action now?

As the post-pandemic growth is likely to flatten, Netflix might struggle to gain new paid customers, especially since it faces tough competition from other streaming platforms like Disney+ and Prime. Netflix’s original series continue to dominate the market but their position is dropping after stiff competition from established and attractive franchises such as Marvel and Star Trek. With its fast growth and rising popularity, Disney+ is likely to catch up with Netflix by 2025.

As Netflix struggles to maintain its market dominance, losing significant revenue through people using its services and not paying for it severely dents its future. Analysts have said that customers dropping subscriptions is the top risk for Netflix 2021.

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While this test remains in a trial stage, it might be too early to determine its success. It does show that Netflix is actively trying to ensure that customers are paying for the services. How they do it, remains a question.

Nandni Mahajan is an intern with indianexpress.com

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