The mistake Netflix makes is to assume that the families and friends, who have been using a shared login, will signup for a subscription on their own. They won't, the value proposition isn't there anymore and these are people who didn't want to pay for the subscription to begin with.

I have serious doubts about Netflix calculations on this decision, but I also don't see what else they could do. They can't buy the content people want and they struggle to produce high quality movies and shows. Their productions are beautiful, but the scripts are severely lacking. Sometimes they get lucky and do a good season of a show, only to screw up subsequent seasons.