Passing On Your Password? Online Streaming Services Are Past It

Many of us were taught to share as kids. Now streaming services ranging from Netflix to Amazon to Disney+ want us to stop.

That's the new edict from the giants of streaming media, who are hoping to discourage the common practice of sharing account passwords without alienating subscribers who've grown accustomed to the hack.

Password sharing is estimated to cost streaming services several billion dollars a year in lost revenue.

That's a small problem now for an industry that earns about USD 120 billion annually, but something it needs to address as spending on distinctive new programing skyrockets. Amazon's upcoming Lord of the Rings series will reportedly cost USD 450 million for its first season alone - more than four times the cost of a season of HBO's Game of Thrones.

"Frankly the industry has been gravitating toward that. It's a question of when, not if, said CFRA analyst Tuna Amobi.

The landscape seems to be pretty set in terms of these new entrants, so it seems like a good time to get a much better handle on subscribers."

It's a tricky balance. The video companies have long offered legitimate ways for multiple people to use a service, by creating profiles or by offering tiers of service with different levels of screen sharing allowed. Stricter password sharing rules might spur more people to bite the bullet and pay full price for their own subscription. But a too-tough clampdown could also alienate users and drive them away.

In March some Netflix users began to get popups asking them to verify their account by entering a code sent via email or text, but also gave them the choice of verifying later. Netflix did not say how many people were part of the test or if it was only in the US or elsewhere.

They'll be taking a very cautious approach to it, Amobi said. Handled the wrong way, there's always a downside to a move like this.

The test comes at a crucial time for Netflix. Last year's pandemic-fueled subscriber growth is slowing.

It remains the streaming service to beat with more than 200 million subscribers globally.

But a bevy of new competitors have emerged, including Disney+, which is cheaper and has quickly snapped up 100 million subscribers in less than two years.

When Disney+ launched in 2019, then CEO Bob Iger said the service was modeled on sharing.

We're setting up a service that is very family-friendly, we expect families to be able to consume it - four live streams at a time, for instance, he said in a CNBC interview.

We'll watch it carefully with various tools, technology tools, that we have available to us to monitor it. But it's obviously something we have to watch.

Roughly two in five online adults have shared passwords to online accounts with friends or family members, according to the Pew Center for Internet and Technology. Among millennials it's even higher: 56% of online adults ages 18- to 29 have shared passwords.

With the cost of all the streaming platforms bought together equaling a cable bill -- which it was supposed to eliminate -- I think it's a great thing to be able to share your login to help family and friends save a few bucks, said Ryan Saffell, 39, an IT director from Las Vegas.

Another study found more than a quarter of all video streaming services are used by multiple households. That includes a family or friend sharing the account they pay for outside of the household, or, less commonly, several households splitting the cost. And 16 per cent of all households have at least one service that is fully paid for by someone else according to the study by Leichtman Research Group. That increases to 26 per cent for 18- to 34-year-olds.

Sharing or stealing streaming service passwords cost an estimated USD 2.5 billion in revenue in 2019 according to the most recent data from research firm Park Associates, and that's expected to rise to nearly USD 3.5 billion by 2024.

That may be a small fraction of the USD 119.69 billion eMarketer predicts people will spend on US video subscriptions this year. But subscriber growth is slowing, and costs are increasing.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)