Netflix brings password crackdown to U.S.

Yahoo Finance Live Senior Reporter Alexandra Canal breaks down the details as Netflix's password sharing crackdown comes to the U.S.

Video Transcript

AKIKO FUJITA: We do have some breaking news coming out of Netflix. The password crackdown has officially come to the U.S. Let's bring in Allie Canal who's been tracking every step of the way for these details. Allie, what does that pricing structure look like for this?

ALLIE CANAL: So, basically, we knew this was coming. This is something they said in their earnings call, that at some point in Q2, hide your kids, hide your wife, but your password sharing crackdown is coming for you. And it's not just the U.S. They also confirmed that they are rolling it out more broadly across the world in countries like the UK, France, Germany, Mexico, Brazil, among others.

Now, the company did say a Netflix account is one that is used by a singular household. So if you have a roommate, that counts. You guys can share a Netflix account. But if you have a child that's away at school, that does not fall under their requirements.

They said everyone living in that household can use Netflix wherever they are at home, on the go, on a holiday, and take advantage of some of these new features. Now, these new features are ones that make it easier, or at least attempt to make it easier, to share those accounts and to create new ones. Number one, you can manage your device by one single click. It allows you to sign in and sign out of devices.

So if you go to a hotel room and you log in to Netflix there, and you forget to log off of that account once you leave the hotel, you can easily do that in a single click. So that's something they said was a widely sought-after feature. You can also transfer a profile.

So if you're a person that currently shares an account with someone, and you want to go and purchase your own account but you don't want to lose all that data and all the shows that you've watched in the past, you can easily transfer that account. And then, if you want to add an extra member, you can do so for the price of $8 a month. And now from what I'm seeing, I think you can only add one extra member, which is going to be a problem in my household because I'm one of three kids.

Who is going to be the one extra member? I don't know. But yeah, this is going to be very interesting. Already, we're seeing an interesting reaction in the share price. It initially went up, then it went down. I think investors are trying to understand if there's going to be some churn here. Analysts, we know, are bullish on it. But still, it's a TBD.

SEANA SMITH: Yeah, Allie. And that's exactly the point I wanted to bring up, because I think there's two different sides of the story when you take a look at this announcement. One side of it is saying that people are going to leave Netflix, they're not going to be willing to pay for their own accounts. On the other side, though, a number of Wall Street analysts have come out over the last couple of months in anticipation of this saying that this is actually going to boost the revenue here for Netflix. And many of these people who have been relying on somebody else to pay for their Netflix, they're actually going to then subscribe to the ad tier version which could then help the growth there.

ALLIE CANAL: Right. It's a ripple effect. And it's all of these revenue initiatives, not just the password sharing crackdown but the ad-supported tier as well that hopefully will help lift profitability. If they're growing, they said they would be willing to spend more on content.

We know that that content spend is flat. Year-over-year, they're planning to spend $17 billion. They're the one player in the streaming wars that have been very aggressive in their content spend, but we're seeing a little bit of a pullback. If these revenue initiatives are successful, though, that could change a lot of the story here.

But again, you have to hope that you don't see a lot of sustained churn. Netflix has said that they do expect people to drop out of the service but that they are going to see that rebound after a couple of months or a couple of weeks. So that's something to watch in terms of that churn level.

AKIKO FUJITA: OK. Allie Canal with that breaking news out of Netflix. Thank you so much for that.