Netflix password sharing is on borrowed time

It might be a while yet, but - if the numbers are true - freeloaders will have to choose eventually

Netflix has allowed password sharing for as long as anyone can remember, but times are changing and this might too - sooner rather than later. (Image: Alexander Shatov, Unsplash)

It certainly has been a long time coming (more than a decade in fact) but the day that around 70 million people will be inconvenienced does not seem to be that far off anymore. Last week several media outlets followed on a few tweets that posted photos of their TV screens displaying an unusual message from Netflix: "If you don't live with the owner of this account, you need your own account to keep watching". It turned out to be a test run of a feature that Netflix had repeatedly denied that it would implement in the past, but is clearly considering now: the restriction, or outright banning, of password sharing. Officially the company insists this was just a test. For anyone watching the streaming wars unfolding, it wasn't.

The password sharing of a Netflix account among several households is something that the service's terms of use clearly prohibit, but also something that the American company has always allowed - one might say that, in the early years, it even helped Netflix become as popular as it is today. One might also note, though, that research companies published during the last 5 years or so reports claiming that 25%, 30% or even 35% of the Netflix accounts actively used belong to a different subscriber. That is a lot of non-paying customers for any subscription service to accommodate. Especially for a service belonging to a company that has shareholders to answer to.

For the longest time it was extremely difficult for Netflix to track password sharers with absolute certainty but British company Synamedia uses AI to make this much, much easier. (Image: Thibault Penin, Unsplash)

So in 2019 - while Netflix's official position per Greg Peters, chief product officer, hadn’t changed - the Americans started working with a little-known British company called Synamedia. That company had developed a special algorithm that could track shared Netflix accounts and, using AI machine learning, determine whether any password sharing happening between different users was within the usage parameters Netflix had set. It started out as a security measure, as the problem of Netflix credentials being stolen and sold on the Web is widely known. But, over time, the Synamedia algorithm was also "trained" to locate password sharing happening with the rightful owner's consent.

Fast forward to last week, then, when a number of people read on their screens that "If you don't live with the owner of this account, you need your own account to keep watching" message on their screens. The Synamedia AI, Netflix feels - based on data the company itself provides - is now probably sharp enough to determine whether someone is using the account credentials of e.g. a friend living on the other side of town (so not of the same household) with his/her consent. That would be an easy case to determine, actually, as there are other "edge" cases - like e.g. a college student using his parents' Netflix account on campus, technically belonging to the same household but at a different location most of the time - that will be harder for Netflix to be strict with.

Netflix insists that the password sharing blocking test it run does not necessarily mean that such a function will be implemented in the service, but it’s rather a matter of when than if. (Image: John-Mark Smith, Pexels)

Right now the company is letting freeloaders off the hook in a way, asking for verification via SMS/e-mail (which a rightful owner could provide) but also allowing them to do so at some other time while encouraging them to create their own one-month-free trial account. This is, in truth, the test Netflix is talking about: a probable "conversion rate" among people that don’t have their own accounts to get their own, as well as the overall reaction of people on the Web when this test run was revealed by the media.

Netflix runs many tests about different things quite frequently, of course, and many of those tests never lead to actual features on the service. One can't help but feel, though, like this particular test is different. Netflix now stands at around 205 million subscribers and even if a conservative 25% of those are not paying customers, it's more than 50 million consumers not contributing to its bottom line. When times were simpler - with no competition from the likes of Disney, no urgent need to build a movie library because studios keep their films for their services and no danger of slowing growth in the US or globally - Netflix could afford the freeloaders. In 2021 we may discover that this is no longer the case.


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