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Netflix's password sharing crackdown has begun — and it looks like a disaster

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(Image credit: Tom's Guide/Netflix/Shutterstock)

As you may have heard, Netflix's password sharing crackdown, where it looks to get more money from those sharing accounts, is already in testing. However, early reports indicate that it's struggling to implement the policy properly — and that could be bad news for the under-fire streaming service.

The crackdown is currently being tested in Peru, Chile and Costa Rica, although it's expected to go wider this year as Netflix seeks to increase its profits in the wake of a drop in subscribers reported in April. The company reportedly wants around $3 per month per user, which is whole lot of potentially bad news for those who don't really have the budget to pay for their own Netflix account every month. 

The big problem with the test, in Peru at least, appears to be confusion over Netflix's own policy. And that confusion has led to some of the exact things that Netflix doesn't want to see happening — and that have already been hitting the streaming service. 

This news comes from Rest of World (opens in new tab) (via our sister site TechRadar (opens in new tab)) which notes that Netflix reps admitted that its subscribers may not see eye-to-eye with the big red streaming machine on the term "household," which is how Netflix delineates the number of allowed streams per account. 

Netflix reps stated that the service always defined households by geographical location, even though some customers believe it's (as they say in the Fast & Furious movies) about family. Netflix reps also said that different subscribers may be paying different charges, which doesn't sound like it's going to engender good will from customers who learn about different rates.

And customers aren't the only ones upset about this. Peru’s consumer rights agency, the National Institute for the Defense of Free Competition and the Protection of Intellectual Property (Indecopi), argued that this lack of consistency can be seen as arbitrary discrimination against users. 

Netflix's password crackdown leads to more cancelations

But as you might have guessed, people canceling their Netflix subscriptions is an unwanted side-effect of the push to stop Netflix password-sharing. 

One user, Kat Galindo in Lima, took this action from Netflix as a sign to just cancel Netflix, telling Rest of World, "It wasn’t just the new charges ... I just wasn’t enjoying most of their shows anymore." The site also heard a similar story from Hugo Vilchez, an engineer in Lima.

After it hemorrhaged subscribers earlier this year, the last thing Netflix wants to do with this crackdown is nudge people to abandon ship. So this should make Netflix take its implementation of this policy a bit more cautiously.

Outlook: How is this going to be enforced?

A user identified as Gabriela A. (who was concerned with Netflix taking down her account if she shared her last name), said, "I'd like to keep using my 'pirate' account for as long as possible." And when her friends got notifications about extra charges, they all simply ignored the message. 

Netflix is putting on a smile, though. It told The Verge (opens in new tab), "The millions of members who are actively sharing an account in these countries have been notified by email but given the importance of this change, we are ramping up in-product notifications more slowly. We’re pleased with the response to date."

All of the confusion at hand seems to speak to a big problem: Netflix wants more money from subscribers it sees as breaking its terms of service — but how many subscribers of any service actually read the fine print. The old iTunes Terms of Service were more of a meme and a joke than a document anyone actually read.

Maybe this will lead to Netflix making more money as this tactic rolls out, but the risks at hand and the flaws in trying to get people to just cough up more cash seem like difficult issues.

Netflix arguably enabled this whole issue, when its social media accounts practically supported this behavior they're now trying to stop. Back in 2017, the Netflix Twitter account posted the message “Love is sharing a password.” (opens in new tab) And, now, it seems like that's a forbidden love to the folks at Netflix.

Next: The new No. 3 Netflix movie is one of the funniest movies of all time and exactly what we need to watch right now. Plus, check out what to watch this weekend with 7 new shows and movies on Netflix, Prime Video, Hulu and more. Also, it's time to circle the Ms. Marvel release date and time on your calendars.

Henry is a senior editor at Tom’s Guide covering streaming media, laptops and all things Apple, reviewing devices and services for the past seven years. Prior to joining Tom's Guide, he reviewed software and hardware for TechRadar Pro, and interviewed artists for Patek Philippe International Magazine. He's also covered the wild world of professional wrestling for Cageside Seats, interviewing athletes and other industry veterans.