How Will Netflix Know Who Is In Your Household?: Everything To Know About Password Sharing On The Streaming Service (2024)

Netflix, the titan of streaming services, has cracked down on password sharing, but it's unclear to many how Netflix knows who is in each household. Launched in 1997 as a DVD rental service, it swiftly adapted to the digital age, initiating its streaming service in 2007. This innovation was more than just a new way to watch movies and TV shows; it represented a seismic shift in media consumption. Today, Netflix boasts a staggering 247 million subscribers globally (via Variety). The platform's appeal extends beyond its extensive catalog; Netflix has become synonymous with compelling, original content, producing critically acclaimed series that have garnered a dedicated following.

The rise of Netflix reflects a broader trend in entertainment consumption. The platform's user-friendly interface, coupled with the ability to stream content on-demand, has resonated with viewers' preferences for flexibility and variety. As a result, Netflix has become part of the daily lives of millions, offering everything from binge-worthy series to thought-provoking documentaries. Its success is a testament to the changing nature of how viewers engage with media, where traditional TV viewing has given way to a more personalized experience. However, Netflix announced a password-sharing ban, which became widespread in 2023, and there are specific ways Netflix knows who is in each household.

RELATED: Best Movies On Netflix Right Now

Why Netflix Cracked Down On Password Sharing

Netflix's decision to crack down on password sharing is primarily financially motivated. The streaming giant estimated that over 100 million people worldwide were accessing its service through shared passwords (via The New York Times). This figure represents a vast number of potential subscribers, translating to a significant revenue loss for Netflix. As the competition in the streaming market intensifies, with rivals like Disney+, Amazon Prime Video, and Max vying for market share, Netflix is increasingly focused on maximizing its subscriber base to maintain its market leadership. This push towards converting shared users into paying subscribers is a strategic response to the evolving market dynamics.

Netflix's growth has slowed in recent years, and new subscriber acquisition has become more challenging, no matter how much new content they produce. By addressing password sharing, Netflix aims to convert a fraction of these shared users into individual subscribers, thereby boosting its revenue and solidifying its position in the competitive streaming landscape. This crackdown is a clear indication of Netflix's evolving business strategy, adapting to the challenges of a maturing market and changing consumer habits.

RELATED: Best TV Shows On Netflix Right Now

How Netflix Defines A Household

Netflix's policy on account sharing hinges on its definition of a "household." According to Netflix, a household consists of individuals who live together and use the same internet connection, essentially meaning they share the same IP address to access Netflix. This policy implies that using a Netflix account outside the primary location, such as at a friend's house or while traveling, could be considered a violation of its terms. The definition is designed to be straightforward yet rigid, allowing Netflix to enforce its policy more effectively.

However, this definition has raised questions about practical scenarios, such as families with members living in different locations (like college students) or those who frequently travel for work. Netflix's approach focuses on the primary usage location of the account, and the company uses various technological measures, such as IP tracking and device identification, to enforce the policy. The strict interpretation of a "household" reflects Netflix's intention to tighten control over account sharing, aiming to convert shared accounts into individual subscriptions and thus increase revenue.

How Does Netflix Know When Users Are Password Sharing?

Netflix employs a sophisticated system to detect password sharing. The primary tool in this system is the analysis of IP addresses, which allows Netflix to determine the geographical locations from which an account is accessed. If an account is consistently accessed from multiple, widely separated locations, it could indicate password sharing. In addition to IP tracking, Netflix also monitors the unique IDs of devices used to access the service. An unusually high number of different devices logging into the same account can be a red flag for password sharing.

Furthermore, Netflix analyzes usage patterns, such as the times when the account is accessed and the types of content viewed; as Netflix explains it: “account activity from devices signed into the Netflix account.” Disparate patterns may suggest that the account is being used by people in different households. This combination of IP tracking, device ID monitoring, and usage pattern analysis gives Netflix a comprehensive view of how each account is being used, enabling it to identify and address instances of password sharing. These technological measures are part of Netflix's larger strategy to ensure that accounts are used as intended, in line with their terms of service.

RELATED: The 25 Best 4K Movies on Netflix

Is There A Workaround To Netflix’s Crackdown On Password Sharing?

The main workaround to Netflix's crackdown on password sharing involves adding additional memberships to an existing Netflix subscription. This option, however, comes with a significant cost. Under the new policy, Netflix allows a primary account holder to add "extra member" sub-accounts for people they don't live with, each at a separate cost. For example, in the United States, the standard Netflix plan costs $15.49 per month. Adding another member to this plan can incur an additional charge of $7.99 per month. This pricing strategy effectively narrows the cost difference between individual subscriptions and shared accounts, encouraging users to opt for separate subscriptions.

Below is a full list of Netflix plans and how much they cost with and with extra members:

How The Crackdown Is Working For Netflix?

The crackdown was not without its challenges, and it seemed like an uphill battle for Netflix. There was a considerable backlash from the Netflix user base, with some long-time subscribers expressing their dissatisfaction and even threatening to leave the platform. Additionally, having to purchase their own subscriptions might not have yielded enough financial incentive for some users, opting to potentially switch to other streaming platforms. Thus, while a workaround exists, its practicality and attractiveness to consumers weren't fully understood. Nevertheless, despite the setbacks, the Netflix password-sharing crackdown was a huge success.

Netflix's crackdown on password sharing has yielded overwhelmingly positive results, at least in terms of Netflix subscriber growth and revenue. In the immediate aftermath of implementing stricter sharing policies, Netflix reported a significant surge in new subscribers. The company gained approximately 9 million new subscribers in its third quarter, a clear indication that many users who previously accessed the service through shared passwords opted to open their own accounts. Additionally, this influx of new subscribers contributed to a notable increase in revenue. For the third quarter, Netflix's revenue was up by 8% from Q3 2022, suggesting a direct financial benefit from the new policy.

Sources: Variety, The New York Times, Netflix