Streaming giant Netflix has revealed how it plans to deliver on its pledge to crack down on password sharing on its app.
Netflix will first enforce its new policy through a trial program in Costa Rica, Chile and Peru. It’s unclear exactly when the policy will apply to U.S. users, but the service has indicated it could expand the crackdown before the end of March.
Under the policy, anyone in a subscriber’s household can use their account as long as their device is connected to the WiFi of the primary location and they open the app at least once every 31 days, according to a Netflix FAQ page for users in Costa Rica.
Netflix said users who want their account to be used by another person who doesn’t live in their primary household will have the option to add that individual to their account at a lower cost than that of the basic plan. This option is available only to those on a standard or premium plan.
The company warned that if a user is traveling and away from their primary location for an extended period, their device could be blocked. To unblock the device, subscribers can request a temporary code that allows them to access the app for seven consecutive days.
Netflix uses IP addresses, device IDs and account activity, among other things, to determine whether a device is in the account owner’s primary location.
The company has been trying to address last year’s slump in subscriber growth by embracing measures like curbs on password sharing and introducing a lower-priced ad-supported tier.
Netflix previously estimated that more than 100,000 households have been free riders on the service by using the accounts of friends or family.
Last month, the company told shareholders that widespread password sharing “undermines our long term ability to invest in and improve Netflix, as well as build our business.”
The company added that it expects to roll out its enforcement features to other markets more broadly, potentially including the U.S., later in the first quarter, which ends in March. Netflix warned shareholders about short-term effects the policy could have on its subscriber growth.
“From our experience in Latin America, we expect some cancel reaction in each market when we roll out paid sharing, which impacts near term member growth,” the company said in the letter to shareholders. “But as borrower households begin to activate their own standalone accounts and extra member accounts are added, we expect to see improved overall revenue, which is our goal with all plan and pricing changes.”
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