Netflix users say the streamer’s crackdown on password sharing is bad for consumers. But is it also bad for Netflix?

netflix interface on a screen
Photo by Matthew Modoono/Northeastern University

If Netflix was once the kind of streaming company to say “love is sharing a password,” it looks like the streamer is preparing for a breakup.

Netflix announced that it’s bringing its new anti-password sharing measures to four more countries––Canada, New Zealand, Portugal and Spain––after testing the waters in Central and South America last year. This all comes as the streaming company looks to roll them out more broadly in the coming months.

After learning more about the details via a mistakenly updated Netflix support page, users were outraged. There was almost unanimous agreement among many users, including Olympic gymnast Simone Biles, that the company’s new rules were a net negative for users. But the widespread criticism of Netflix’s next big move raises questions about whether these new measures are even good for Netflix.

According to Yakov Bart, associate professor of marketing at Northeastern University, Netflix’s goal is clear: get as many paying users on its platform as possible. It’s a challenge most major streamers are struggling with. Netflix is using both a carrot––a cheaper, advertisement-filled pricing option––and a stick––new password sharing rules––to accomplish that. But he says there is “definitely a possibility” that Netflix’s plan could result in further loss of subscribers, at least in the short term.

“I think this is what they’re trying to do carefully,” Bart says. “I think they’re going to watch how this thing develops in the markets that have comparatively less importance for them, such as Latin America.”

According to the new rules, users will now have to set a primary location for their account. All users within their household will still be able to access that account on their devices. However, people who live outside the household won’t be so lucky. They can create their own Netflix accounts or the primary account holder can add up to two “sub accounts” added, for a fee per user. Per added user, the cost amounts to $7.99 Canadian dollars ($5.96 U.S.), $7.99 New Zealand dollars ($5.09 U.S.), €3.99 ($4.30 U.S.) in Portugal and €5.99 in Spain ($6.45 U.S.).

According to Netflix, there are more than 100 million households worldwide that share accounts on the platform. Whether all the new obstacles and costs––and wide array of new streaming options––will contribute to a mass exodus is unclear, but based on its experience in Central and South America, the company is somewhat confident. CNN reported that in a letter to shareholders, the company projects an overall growth in users over time in those markets, despite early fears that users would cancel their subscriptions.

“To cancel and find some other way to do it is hard, especially if you like to watch Netflix,” says Paul Fombelle, associate professor of marketing at Northeastern’s D’Amore-McKim School of Business. “If the service is delivering value to the customer––and in most cases it is; people are spending a lot of time on Netflix––then people are going to want to watch it as long as they continue to provide the content.”

Although Fombelle says Netflix’s password sharing crackdown is “inevitable,” he admits it’s not surprising that the company’s attempt to upset the paradigm of how streaming has historically worked has riled some users.

“People don’t like change, and they had this expectation that they could have an account with their parents or their friends and three or four people could share it,” Fombelle says. “That was the social norm that Netflix had established, and it’s been established for a long time. … From a relational perspective, they violated an agreement in the name of trying to increase profit margins.”

More than any other major streaming service, Netflix has established a relationship with its users. People have established habits around the platform and a sense of what it means in the lives of them and their families. If password sharing becomes more of a challenge, what does that mean for children who leave for college, long-distance couples or frequent travelers who often aren’t at home? Bart says it raises a lot of questions.

“It does create a lot of issues, and I think the reason Netflix is going slowly about it is because they want to test it first and work out wrinkles on the technical side but also test it from the point of view of seeing what effect it’s going to have on the subscriber base,” Bart says.

How Netflix navigates the rollout of these new rules in the coming months will also send a signal to the rest of the streaming world. It’s not necessarily  a guarantee that every streamer will follow Netflix, Bart says. It will depend on how each platform chooses to “maintain their competitive advantage relative to Netflix.” For some platforms, that might come down to focusing on higher quality content and creating slow growth.

But if Netflix’s gamble pays off, Fombelle predicts users should expect to see at least some streaming platforms will follow in its wake.

“I do think this change is coming, and it’s going to take someone like Disney or Netflix to go, ‘We’re going to pull the Band-Aid and go with it,” Fombelle says. “Once the social norm has changed and it’s just expected you can’t share your password, I don’t know why the other platforms wouldn’t follow suit quickly.”

Cody Mello-Klein is a Northeastern Global News reporter. Email him at Follow him on Twitter @Proelectioneer.