Netflix warns of global crackdown on password sharing

FILE - This photo shows the company logo and view of Netflix headquarters in Los Gatos, Calif., Jan. 29, 2010. (AP Photo/Marcio Jose Sanchez, File)

WASHINGTON (TND) — Netflix, one of the largest streaming juggernauts in the world, warns that a global crackdown on password sharing is coming.

In its quarterly shareholder letter, the company said it purposefully allowed generous out-of-home password sharing because it helped get "more people using and enjoying Netflix." But now, Netflix said it needs to hold a 20% operating margin.

What does that mean for password sharers? Well, the American subscription service that functions both as a streaming and production company has been testing options in three Latin American markets since March.

These two new features in Chile, Costa Rica and Peru allow accounts to add an extra member for roughly $2.99 or transfer the profile to a new account.

The transfer profile option allows members on their basic, standard and premium plans to either transfer to a new account or an extra member sub-account — which allows the user to keep the viewing history, "My List" and personalized recommendations.

Netflix's co-founder and CEO said in 2016 that the company was "doing fine" without taking any strong actions. "Password sharing is something you have to learn to live with, because there’s so much legitimate password sharing, like you sharing with your spouse, with your kids ... so there’s no bright line."

Executives said on the company's earnings call Tuesday that Netflix could expand the model beyond those countries, charging extra to accounts outside the home.

The shareholder letter also noted that the company's goal is "to sustain double-digit revenue growth, increase operating income even faster (as we expand margins) and generate growing positive free cash flow (FCF)."

Netflix didn't provide a specific global strategy yet, but suggested changes could come as early as 2023.

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