Netflix has warned telecoms companies including Sky, Virgin Media and BT to brace for a potential backlash from customers who view its films and TV shows through their services, as the streaming service prepares to crack down on the widespread practice of password sharing that allows millions of British homes to watch for free.
Netflix, which is getting tougher with password sharing as one of a number of moves to increase profitability amid slowing rates of new subscriber growth, has estimated that about 100m homes that pay for its service globally share their passwords with friends and family.
The world’s biggest streaming service, which has already begun to crack down on password sharing in regions including Latin America, New Zealand, Spain, Portugal and Canada, is expected to start targeting British subscribers in the coming weeks.
About a quarter of the UK’s 15 million Netflix subscribers, almost 4m homes, allow others to use their service for free, according to the research firm Digital i.
Netflix intends to get paying customers to set a primary location, and when their account is used in other areas the account holder will be warned. They will be encouraged to sign up for a “paid sharing” model, designed to get the free users added for a few extra pounds a month.
The company has held talks with partners that bundle its service with their own TV and broadband packages – such as Sky, TalkTalk, Virgin Media and BT – to warn them of the impending crackdown, in a move first reported by the Financial Times.
Telecoms companies are likely to receive calls, chat and email queries from some customers about the potential curbs to usage that they have become accustomed to sharing for free.
“There may initially be a bit of kneejerk reaction from some subscribers,” the Digital i managing director, Matt Ross, said. “We have seen a drop in viewing per account in Spain where Netflix has already started to crackdown on password sharing. The question is what the overall impact will be on subscriber numbers in the long term.”
Spain has a much higher rate of password sharing than the UK, with 39% of Netflix users sharing their login.
Earlier this year, Netflix moved to delay the wider rollout of its password sharing crackdown from the first three months of the year to the April to June period after the company noticed a “cancel reaction”.
However, Netflix said that after an initial dip subscribers soon started adding “extra member” accounts, citing Canada where the paid subscriber base has grown since the launch of the “paid sharing” initiative.
“Based on what we have seen in markets where Netflix has rolled out its plan so far there hasn’t been a huge amount of consternation among the subscriber base,” Richard Broughton, an analyst at Ampere, said. “Netflix has had plenty of time to test this. It is not too uneconomical to upgrade to add more people, we don’t see large numbers of people furious about not being able to access Netflix for free.”
Netflix has also responded to the cost of living crisis by launching a new pricing tier, at £4.99 a month in the UK, which includes advertising for the first time.
Netflix, Sky, Virgin Media, TalkTalk, Sky and BT declined to comment.