Netflix (NFLX 1.74%) promised investors it would cut down on password sharing in 2023. So far, it has made limited progress.

After a trial run in a few Latin American countries last year, Netflix said it would expand its paid sharing efforts more broadly in the first quarter. But it only pushed customers in four new countries -- Canada, New Zealand, Portugal, and Spain -- to pay to share their accounts with viewers outside their homes.

To be sure, cracking down on paid sharing remains a massive opportunity for Netflix. But the opportunity also comes with substantial risks, which may be why Netflix is taking its time to make sure it implements it right before entering its biggest markets.

How big is the paid-sharing opportunity?

Netflix says more than 100 million accounts are sharing passwords, including 30 million in the United States and Canada. While it probably can't convert all those illicit viewers into new subscribers, they still remain a substantial revenue opportunity.

Netflix is currently asking password-sharers in Canada to pay an extra CA$7.99 per month to share their account with people outside their home. It's expected Netflix will ask American subscribers to pay a similar amount. International subscribers may not pay as much: Netflix is testing 3.99 euros in Portugal and 5.99 euros in Spain.

If just one-third of those North American sharers convert with an average revenue increase of $9 per month ($8 for sharing; $10 for a new basic plan), that's an extra $1 billion in revenue. Similar results internationally at half the average revenue per user is another $1 billion.

Meanwhile, analysts are forecasting less than $3 billion of total revenue growth this year. Even a mediocre execution on converting password-sharers into higher revenue will push Netflix to outperform those expectations.

Watch for the pushback

Netflix knows cracking down on password sharing isn't going to be all roses. In fact, it has warned investors that it'll have a negative impact on subscriber growth initially.

"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," management wrote in its fourth-quarter 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."

Management said it expects to see that play out in lower than usual net subscriber additions in the first quarter, but stronger net adds in the second quarter. The second quarter is historically the streaming company's weakest in terms of seasonality.

However, with the rollout affecting just a handful of countries, the overall impact could be very muted in the first quarter. The company reports earnings on April 18. Investors will need to focus on management's commentary in the shareholder letter and earnings call to determine whether the password-sharing crackdown holds as much promise as expected, or if the company needs to figure out a better way to extract value from its account holders.