Netflix signage next to the Nasdaq MarketSite in New York, U.S., on Friday, Jan. 21, 2022.
Netflix surprised the world this week, saying it plans to finally address the rampant practice of password sharing.
More than 100 million households are using a shared password, Netflix said Tuesday, including 30 million in the U.S. and Canada.
But the video streamer doesn't plan to simply freeze those shared accounts. Instead, the company will likely favor the setting of an extra fee for those accounts being used by multiple people outside of the home.
Netflix's plan to capture that lost revenue would start with an alert being sent to account holders whose passwords are being used by other households.
The company has already started a test of this feature in Peru, Costa Rica and Chile. For accounts that are sharing a password across addresses, Netflix is charging an additional fee to add "sub accounts" for up to two people outside the home. The pricing is different per country — about $2.13 per month in Peru, $2.99 in Costa Rica, and $2.92 in Chile, based on current exchange rates.
The company also allows people who use a shared password to transfer their personalized profile information to either a new account or a sub account, allowing them to keep their viewing history and recommendations.
"If you've got a sister, let's say, that's living in a different city, you want to share Netflix with her, that's great," said Chief Operating Officer Greg Peters during the company's earnings conference call. "We're not trying to shut down that sharing, but we're going to ask you to pay a bit more to be able to share with her and so that she gets the benefit and the value of the service, but we also get the revenue associated with that viewing."
Netflix didn't say how much revenue it expects to generate from implementing its sharing strategy worldwide, though Peters said he thought it would take about a year to put its sub account pricing into use globally.
A survey from research organization Time2Play suggested about 80% of Americans who use someone else's password wouldn't get their own new account if they couldn't share the password. It didn't survey how many current account payers would be willing to pay more to share with others.
Peters also suggested the company may still tweak pricing or further review its test strategy.
"It will take a while to work this out and to get that balance right," he said. "And so just to set your expectations, my belief is that we're going to go through a year or so of iterating and then deploying all of that so that we get that solution globally launched, including markets like the United States."