Netflix Inc's (NFLX  ) attempts to restrict password sharing may be hitting snags as the company policy changes being tested in South America are met with consumer backlash.

Netflix's reveal of declining subscriber numbers earlier this year sent its stock on an unprecedented downturn that it hasn't recovered from and has prompted speculation of the pioneering giant hitting the ceiling as the streaming market becomes far more cutthroat and competitive. A crackdown on password sharing has been in the works for some time and was first announced back in March. While the announcement has inevitably struck a sour chord with consumers, the decision by Netflix's leadership is understandable from a business perspective, given the potential losses in income the company faces from the practice of password sharing.

However, putting policy changes into effect to curtail password sharing is already running into plenty of obstacles during the company's testing. Speaking to Netflix users in Peru, Rest of the World found that the company's execution has been inconsistent, with its messaging to customers similarly lacking uniformity. One user who shared his account with family and friends outside of his household did not receive notice of changes, nor did he notice extra charges for password sharing. In contrast, another user received a warning but did not notice additional charges for sharing her password.

Some customers, fed up with unclear messaging from the company and the possibility of extra charges, have canceled their Netflix subscriptions. While further subscriber losses are the opposite of what the company wanted, Netflix can only blame itself for what appears to be a faulty execution of a policy change. Speaking anonymously to the publication, a Peruvian Netflix customer service representative noted that they and their co-workers did not have clear instructions on what to communicate to customers, hinting at a lack of cohesion with policy enforcement.

Netflix is stuck between a rock and a hard place with its attempt to crack down on password sharing. The rock comes in the form of a consumer backlash against the policy, which has prompted some users to flee to other streaming services that are cheaper and seem more worth the subscription price. The hard place, of course, takes the shape of Netflix's apparent dysfunction in effectively implementing a fundamental policy change, which is doing little to garner investor confidence at a critical time when trust between shareholders and the company is at an all-time low.

However, there is plenty of potential in Netflix, despite its subscriber losses and the failure to shore up password sharing thus far. The company has demonstrated that it can produce high-quality shows like Squid Game or Stranger Things that are capable of developing dedicated fanbases and cultivating long-term subscribers. While cracking down on password sharing could help shore up subscriber loss, investing in creating more quality programming could help stymie further losses by providing greater incentive for users to stick around even if the company fully implements a charge for password sharing.