Netflix knows you are all sharing your passwords, they just haven't decided if they're going to do anything about it. Is it illegal to share your passwords? Yes, it technically is.

It is in the Netflix agreement you don't read, but sign anyway. It says that user's passwords "may not be shared with individuals beyond your household". And according to a ruling back in July of 2016, password sharing could violate the U.S. Computer Fraud and Abuse Act.

On the conservative side, we'll use a $10 Netflix subscription, even though the most popular plan is the $12.99 plan. Now, let's say 10% of the 137 million Netflix customers are sharing their passwords outside of their household. So 13.7 million people aren't paying $10 a month. That brings us to $137 million per month, which brings us to about $1.6 billion per year Netflix isn't getting.

Of course these are really rough numbers. You could look at the $15.99 Netflix subscription because that one allows people to have up to 4 screens streaming. But you also have to know that not everyone who is getting a Netflix password from someone else would automatically pay for Netflix if they weren't allowed to have the shared password.

Netflix CEO Reed Hastings isn't too worried about it though. He knows password sharing is a thing:

Password sharing is something you have to learn to live with, because there's so much legitimate password sharing . . . sharing with your spouse, with your kids . . . so there's no bright line, and we're doing fine as is.

He also believes that in long run, it really just matters what streaming service people are choosing, because that will help decide who is going to the winner of the Great Streaming War.