Written By: Stephen Lovely and Kate Fann | Published: May 31, 2023

After heated discussions over the past few years about Netflix cracking down on password sharing, the streaming service has finally implemented new rules in the United States. On May 23, Netflix introduced a new policy preventing users from accessing accounts belonging to people outside their homes. Anyone using a login from their parents, sibling, or ex would no longer be allowed to mooch off their accounts, and many people are not pleased with the changes.

The purpose of the change is to crack down on non-paying users to boost profits. Netflix has achieved a great deal of market saturation in the U.S., with 73% of American accessing the platform, more than any other streaming video-on-demand service. But could Netflix be on its way to increasing profits or drive users away to produce the opposite? To discover how these changes may impact Netflix’s U.S. userbase, we gathered insights from 1,485 Netflix viewers. 

Key Findings

• Moochers impact Netflix more than any other platform besides Disney+ – 16% of their viewers are freeloaders who access accounts belonging to people outside their households.
• Just 8% of these unauthorized Netflix users plan to pay for their own accounts now that Netflix has cracked down on password sharing. This could lead to an additional 1.7 million paid users. The rest say they will attempt to keep mooching or just stop watching Netflix.
• The rule changes could also backfire on Netflix, at least in the short term. While the majority plan to keep their subscriptions, 23% of paying users say they’d like to cancel their accounts in response to the new policies. That’s as many as 15.2 million people who could cancel their Netflix subscriptions.

What Are the New Password-Sharing Rules on Netflix?

Netflix will crack down on users by prohibiting them from using accounts outside of their homes. The streaming platform will sniff out offenders by watching accounts more closely. The company plans to monitor IP addresses, device IDs, and account activity from devices signed into a Netflix account. Why is this happening now? For one reason, Netflix has more password moochers than most other streaming platforms.

Though the vast majority of users properly pay for access to streaming platforms, password-sharing cuts into profits. Through our continued research on subscription mooching, we estimated the industry loses an estimated $2.3 billion annually due to password sharing. Netflix is attempting to gain profit losses from freeloaders to increase their bottom line.

The process of verifying your home's address will occur every 31 days. Using two-factor authentication, every user is required to verify their in-home streaming devices. One silver lining is that users will be allowed to use Netflix while traveling. Similar to verifying in-home devices, users can verify travel on a seven-day cycle.

Should moochers decide to continue using someone else's account, it will cost the account holder. For non-household members using the account, the streaming platform will charge an additional $7.99 per month. This upcharge will only be reflected for standard and premium plans. The standard plan can add one additional member while premium plans can add up to two. The upcharge is not supported for the ad-supported and basic plans.

How will U.S. Netflix Users React to Rule Changes?

Our study indicated that only 1 in 10 respondents weren’t aware of the changes Netflix planned to make. But, while most of them knew it was coming, they hadn't decided what changes they would make to their accounts if any at all.

A majority of paying users planned to maintain their current practice with the platform despite the rule changes. However, 23% of subscribers indicated they would cancel their subscription, and another 5% would pay for additional users. Some of those who say they will cancel their subscriptions may have already been planning to cancel for other reasons, and others may just be feeling inconvenienced by the new changes and costs.

Based on the current number of U.S. subscribers, if 23% cancel their accounts, this would result in an estimated 15.26 million users lost. Most indicated price as their reasoning and with this new password-sharing rule, it may have been the final straw for Netflix holdouts. For those with price concerns, this is more likely to happen if users need to pay more to maintain access.

Two of the participants in our study shared they would change how they use the platform due to the new changes and content availability. “There is not much content on there we enjoy, aside from Stranger Things. Once that is over, we’ll likely cancel,” a 40-year-old woman shared. As for a 35-year-old woman, she responded, “I'll stop borrowing and make an account and only pay for when there is something I want to watch.”

Other users with families are concerned about their adult children using Netflix while they're away from home. One woman surveyed, aged 50, isn't sure she will continue with Netflix if her child can't use the account in college. “Does this mean I’d have to pay extra for my college student to use my account? Then I’ll consider canceling. Netflix isn’t worth it.”

Most Netflix freeloaders, who tend to be younger adults, will not invest in their own Netflix subscriptions. However, 8% of moochers said they will take this opportunity to finally get their own legitimate Netflix accounts and pay for access. While this isn’t an immediate groundswell of growth, it could create an additional 1.7 million users for Netflix in the U.S. in the short term.

Another 40% of password moochers would try to keep accessing Netflix the way they do now. Some of these illegitimate users share that they send money to the account holder to pay for the subscription, so the original account holders may need to update their subscriptions to accommodate out-of-house users.

Conclusion

The US isn't the first location Netflix has instated these changes. The policy was rolled out in Canada, Portugal, Spain, and New Zealand. In Spain, Netflix has received a lot of backlash, which has resulted in a loss of revenue. With the reception of US Netflix users, it's possible the change will equate to a loss in this market as well.

Overall, Netflix could stand to lose 13.5 million users once the new policy is effective, and it's likely Netflix could see more loss than gain. Giving up access to one of the largest streaming platforms may be more difficult than some users realize, with Netflix providing a wealth of original content. As users feel the tug on freeloaders, it will be interesting to see how the change plays out among streamers.

Our Data

In 2023, we conducted two studies about streaming platform users. The first study of 927 streamers established the percentage of unauthorized users (or “moochers”) on each major streaming platform. The second study, conducted in May 2023, asked 752 Netflix users about their awareness of policy changes on the platform. Those who were not aware were informed of the new policies. We based our estimates of the number of Netflix users on company earnings reports from Q1 2023.