Here’s when Netflix might start charging a password-sharing tax

Netflix shares crashed and burned earlier this week as the world’s top streamer revealed a net loss of subscribers for the last quarter. It was the first time the company lost subscribers in a quarter in more than a decade, prompting panic among investors. Netflix acknowledged that password-sharing is now a big problem and explained that it’s looking to tax customers who want to share accounts.

The password-sharing fee isn’t a surprise, as Netflix has started pilots in three countries. Customers can add sub-accounts to their main family account for a monthly fee on top of what they already pay for Netflix.

We explained before that the password-sharing crackdown feels imminent, and Netflix basically confirmed it a few days ago. The company revealed how many people use the service without paying for it. But Netflix also said that deploying the password-sharing tax isn’t going to happen this year. With that in mind, when might Netflix finally start charging you to share your password?

Depending on how much you pay each month for Netflix access, accounts are meant to be shared only with the members of a household. But if you’re still using your ex’s friend’s father’s Netflix subscription, your free ride is seemingly coming to an end.

The good news is that according to Netflix itself, the password-sharing tax won’t come until sometime in 2023 at the soonest.

How bad is it to share a Netflix account?

Netflix password-sharing outside of the household isn’t illegal. And of course, you can’t go to jail or anything like that.

It’s a process Netflix has been aware of for years, and the company did not mind it as long as each quarter brought in more paying customers. But the password-sharing tax is now a reality that Netflix subscribers will have to deal with.

Customers don’t risk anything if they share their passwords. They aren’t open to fines or legal action. You can continue sharing your Netflix accounts with friends and family. And you can keep using someone else’s login for quite a while.

But Netflix knows exactly how many people are paying customers and how many are accessing the service without paying. From Netflix’s quarterly shareholder letter:

In addition to our 222 million paying households we estimate that Netflix is being shared with over 100 million additional households, including over 30m in the UCAN region. Account sharing as a percentage of our paying membership hasn’t changed much over the years, but, coupled with the first factor [uptake of connected TVs, adoption of on-demand entertainment, and data costs], means it’s harder to grow membership in many markets — an issue that was obscured by our COVID growth.

Netflix is now looking to tax the more than 100 million users who benefit from password-sharing without paying. It’s not just a shareholders’ letter implying it might happen. This is co-CEO Reed Hastings saying it.

Netflix is working on a password-sharing tax

“We’re working on how to monetize sharing,” Netflix co-CEO Reed Hastings said earlier this week.

He continued, “You know, we’ve been thinking about that for a couple years. But you know, when we were growing fast, it wasn’t the high priority to work on. And now we’re working super hard on it. Remember, these are over 100 million households that already are choosing to view Netflix. They love the service. We’ve just gotta get paid in some degree for them.”

Hastings said some early tests on password-sharing fees started over a year ago. The company just concluded its first big test in one country, though the exec didn’t reveal where this particular test took place.

It’s unclear if this is related to the recent password-sharing tax test that Netflix launched recently. Or to the test that warned Netflix users about accessing accounts outside the household.

But the Netflix tax for password-sharing will take a while to arrive. The solution will need “a year of iterating and deploying,” COO Greg Peters said. That means the Netflix password-sharing tax won’t arrive until 2023 at the earliest.

Netflix doesn’t want to dismantle password-sharing completely, only to tax the practice. Also, the company will want to implement the feature globally, not just in the US.

That should give you a rough estimate of how long you’ve got until you have to make a big decision regarding Netflix access. In about a year from now, you’ll have to decide whether to forget about Netflix, start paying the password-sharing tax, or get yourself a brand new account.

Of course, you can also use this simple but brilliant trick to save money on Netflix.