Netflix expands its password-sharing crackdown

In late August, thousands of Netflix users across Latin America found they had been logged out of their accounts on their smart TVs. After logging back in, those subscribers were prompted to pay an additional fee. The previous month, Netflix had announced that it was piloting a password crackdown in Argentina, El Salvador, Guatemala, Honduras, and the Dominican Republic — the second phase in a wider rollout. 

In this latest pilot, as long as a subscriber uses Netflix at the account holder’s “home” — the physical location where the account is registered — they won’t see additional charges. But any long-term use outside that location will require them to purchase an account for an additional location.

The announcement of this latest pricing experiment triggered a wave of criticism, most notably among users in Argentina — the fourth-largest household penetration rate for Netflix globally, according to Comparitech, a consumer tech research platform, behind only the U.S., Canada, and Australia, with more than 4.5 million subscribers as of 2020. Argentine users took to the internet more vociferously than any other country, as anti-Netflix memes, hashtags, and posts went viral across social media. Many threatened to leave Netflix en masse by popularizing the hashtag #ChauNetflix (#ByeNetflix), a riff on the platform’s local #CheNetflix promotional campaign on Twitter.

Rest of World found little evidence that the protests triggered mass unsubscription from Netflix in Argentina. However, the country’s long-term economic issues may be what ultimately put the streaming platform’s subscriber numbers in jeopardy. 

Joaquín Serpe, a member of the Global Emergent Media Lab, told Rest of World that since subscriptions are priced in U.S. dollars, their cost effectively rises as the Argentine peso loses value. Additionally, Argentine consumers are up against monthly caps on the U.S. dollars they can save and credit card limits on the spending of foreign currency, making Argentines particularly sensitive to price hikes. “It’s a situation in which people are feeling all sorts of economic precarity — even people that are in the educated middle class,” Serpe said.

Several weeks after the pricing policy came into effect, Rest of World spoke to 10 Netflix subscribers across Argentina, many of whom found the measure hostile enough to leave the platform. The policy is currently not affecting all users in the country, but some canceled their subscriptions immediately on hearing the announcement. Additional charges might affect other  Netflix subscribers globally within the coming year, while Latin America continues to be the testing ground for this ongoing policy rollout.

Argentine users told Rest of World they were worried Netflix charges its subscriptions in U.S. dollars. But the pricing for an additional “home” suggests Netflix may have taken Argentines’ price sensitivity into account. In Argentina, the pilot fee is 219 pesos ($1.50); in every other country, that fee is $2.99. Yet, the Argentine fee increases to 381 pesos ($2.62) following the government’s taxes on foreign transactions, and that dollar price effectively continues to rise given inflation — expected to peak at 95% by the end of this year. Argentina’s median monthly income is approximately $250. 

Netflix did not comment on the specific economic conditions facing subscribers in Argentina, but, in a statement to Rest of World, confirmed it was conducting regional testing on its password-sharing policies. “We want to get it right,” Kumiko Hidaka, director of global product and technology communication at Netflix, told Rest of World.   

Earlier this year, the streaming company experimented with a similar password crackdown in Peru, Chile, and Costa Rica. In its April 2022 quarterly letter to shareholders, the company reported that the new policies were meant to monetize the practice of password sharing, and in effect, recoup annual lost revenue. It estimates more than 100 million people are currently using another household’s account worldwide. Netflix’s original pricing policy trials continue to run parallel to this new pilot in five other Latin American and Caribbean countries.

Experts noted this indicates Netflix may be running A/B testing of its new pricing policies across the region, and measuring subscriber responses to fine-tune its long-term pricing strategy. Explaining why Netflix chose Latin America to conduct its pilots, Hidaka told Rest of World that “there is, on average, a high rate of sharing across the region.”

The company amended its pricing strategy following the response from customers in Peru, Chile, and Costa Rica, including a change from charges for individual “members” outside the account’s household to additional “homes.” There is also an allowance for travel with laptops and mobile devices.

The tweaks were not enough for many Argentine subscribers who reacted vocally against the price increase on principle, before any changes had been effected. In the days following Netflix’s announcement, angry customers launched the #ChauNetflix hashtag as a way of protesting the policy. 

“I want to make it clear that I’m unsubscribing because I don’t agree with the changes,” tweeted a user whose Twitter bio says they are based in Argentina. Another user with the name Raúl Britos compared Netflix to other platforms available in the country and wrote: “they allow you to watch [their content] wherever you are, and don’t charge you extra for it.”

Rest of World also spoke to users who said they felt the service wasn’t worth the extra price, despite being able to afford it. Many decided to leave the platform without making their decision public on social media.

“It was hard for me to find things worth watching; it was a loss of time and money,” said Paz Tibiletti, a Buenos Aires-based journalist, to Rest of World. Andrés Grabois, a local cinema technician, unsubscribed after he felt the measure was unnecessarily bitter. 

“The content was bad,” he told Rest of World, choosing to stick with his HBO+ subscription and watch other content through Stremio, a free streaming app. 

Some subscribers told Rest of World they have not experienced any changes to their accounts, and continue to share them at no extra cost.

Officials with Argentina’s national communications and media regulator, Enacom, told Rest of World that the government cannot regulate Netflix and other digital streaming services’ policies. However, Gustavo López, vice president of Enacom, said during a July interview that digital services such as Netflix “shouldn’t change contracts unilaterally, especially given the crisis our country is going through.”

A source with Netflix’s operations in Argentina told Rest of World, on condition of anonymity for fear of professional repercussions, that the anger displayed on social media did not translate to a mass exodus. This is a point the streaming company is no doubt looking into as it prepares to launch an updated version of the policy across the rest of Latin America, and beyond. For now, the subscriber response to the pilot in Argentina is likely a source of data for Netflix, as it continues to experiment in the region to refine its password-sharing strategy.

“They are trying to prove this strategy in different countries, and they are going to adopt the one that causes the least damage for Netflix worldwide,” Guillermo Mastrini, a professor specializing in mass media policies and economics at the National University of Quilmes and the University of Buenos Aires, told Rest of World. He cautioned that, when it comes to subscriber responses, the insights Netflix gains in Argentina may not translate seamlessly to other markets, given the country’s unique local conditions. “I think Argentina is a really bad country to explore this [policy] as our economy is completely crazy. It’s not going to make sense for other countries,” he said.