Netflix needs to be “careful” in its crackdown on sharing passwords, says co-founder [Video]

Netflix (NFLX) co-founder Marc Randolph has complained about the platform’s crackdown on password sharing.

Randolph, who served as the company’s first CEO from its inception in 1997 until 2003, told Yahoo Finance in a new interview that the streamer needed to execute its strategy “carefully.”

“I don’t think anyone would want to make it difficult for people who have legitimate uses to share their password, share their password, or use their password in multiple places,” Randolph explained.

“But at the same time [Netflix] wants to control the egregious use where people share their password with dozens or dozens of other people.”

It is common among streaming subscribers to share platform passwords with their friends and family for cost savings and easy accessibility. According to Netflix, more than 100 million homes use a common password, including 30 million in the US and Canada.

But Randolph says there are some users who are “obviously wrong”.

“It’s a continuum from one to the other — Netflix’s challenge is finding that midpoint,” he continued, emphasizing that people who “legitimately” use the service and “want the convenience” of sharing passwords between family members share, should still be able to do this So.

In a March blog post, the streaming giant confirmed that subscribers who share accounts with people outside of their household will pay an additional fee of between $2 and $3.

The company is currently testing the pilot program in Costa Rica, Chile and Peru; However, a new report from global tech site Rest of the World revealed that the launch was confusing for users, who noted a lack of clarity around Netflix’s definition of “household.”

The outlet, which surveyed more than a dozen users in Peru, illustrated how some users were canceling their subscriptions as a result of the program, while others claimed they could share passwords (at no additional charge) simply by ignoring the new policy.

In a statement, a Netflix spokesperson told Yahoo Finance, “While we started work on paid sharing over 18 months ago, we’ve been clear for five years that ‘a Netflix account is for people who live together in a single household’.”

“The millions of members actively sharing an account in these countries have been notified via email, but given the importance of this change, we are increasing in-product notifications more slowly. We are satisfied with the response so far.”

The company plans to expand the rollout later this year, coupled with the launch of its cheaper ad-supported model, but it’s clear some changes need to be made.

“Netflix has been obsessed with testing since the beginning,” said Randolph, who documented his journey with the company in the book That Will Never Work.

“You really want to be sure you know what you’re doing. They don’t want to just launch something and see what happens…

Netflix has long turned a blind eye to password sharing. Even the company’s CEO, Reed Hastings, noted that “password sharing is something you have to live with.”

However, the streamer has faced apparent headwinds in recent quarters as subscriber growth slows amid increased competition and sky-high production costs.

Netflix’s unexpected drop in subscribers in the first quarter caused its stock to plunge 35% and wiped out more than $50 billion from its market cap. Since then, the stock has struggled to recover — it’s down more than 67% year-to-date as investors question the longevity of Netflix’s business model.

Last month, the company confirmed to Yahoo Finance that it will lay off about 150 jobs of the streamer’s 11,000 employees to reduce spending and offset slowing revenue growth.

Overall, however, media analysts and executives remain fairly optimistic that a crackdown on passwords will set the streamer up for long-term success.

“First, it increases overall subscriber count, often a market indicator of success,” said Jon Christian, founding partner of OnPrem, a global technology company that works with major entertainment networks to boost content performance.

“Second, more paying subscribers will generate more revenue for Netflix. The ability to add subscribers will require new ways of monetization. At a time when there are multiple options for consumers, platforms may be more careful about subscriptions,” he added.

Alexandra is Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]

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