NEW YORK (AP) – Many of us have learned to share as children. Now streaming services from Netflix to Amazon to Disney + want us to stop.
It’s the new edict from the media streaming giants, which hope to discourage the common practice of sharing account passwords without alienating subscribers who have become accustomed to the hack.
Password sharing is estimated to cost streaming services billions of dollars a year in lost revenue. It’s a small problem now for an industry that makes around $ 120 billion a year, but one that needs to be addressed as spending on new, distinctive programming skyrockets. Amazon’s upcoming “Lord of the Rings” series is reportedly costing $ 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 focused in this direction. It’s a matter of when, not if, ”CFRA analyst Tuna Amobi said. “The landscape seems pretty defined when it comes to these new entrants, so it seems now is a good time to better manage subscribers.”
It’s a delicate balance. Video companies have a long history of providing legitimate ways for multiple people to use a service, by creating profiles or offering levels of service with different levels of screen sharing allowed. Stricter password sharing rules could encourage more people to bite the bullet and pay top dollar for their own membership. But too harsh a crackdown could also alienate and drive users away.
In March some Netflix users started receiving pop-ups asking them to verify their account by entering a code sent via email or text, but also gave them the choice to verify “later.” Netflix did not say how many people participated in the test or whether it was only in the United States or elsewhere.
“They will take a very cautious approach,” Amobi said. “Manipulated the wrong way, there is always a downside to a move like this.”
The test comes at a crucial time for Netflix. Subscriber growth fueled by last year’s pandemic is slowing. It remains the streaming service to beat with over 200 million subscribers worldwide. But a slew of new competitors have emerged, including Disney +, which is cheaper and quickly garnered 100 million subscribers in less than two years.
When Disney + launched in 2019, then CEO Bob Iger said the service was based on sharing.
“We’re putting together a very family-friendly service, we expect families to be able to consume it – four live streams at a time, for example,” he said in an interview with CNBC. “We are going to monitor it carefully with various tools, technological tools, that we have to monitor it. But this is obviously something that we have to watch out for.
According to the Pew Center for Internet and Technology, about two in five online adults have shared passwords on online accounts with friends or family members. Among millennials, it’s even higher: 56% of online adults between the ages of 18 and 29 have shared passwords.
“With the cost of all the streaming platforms bought together amounting to a cable bill – which it was supposed to eliminate – I think it’s a good thing that you can share your connection to help family and friends save a few dollars, ”said Ryan Saffell, 39, IT director of Las Vegas.
Another study found that over a quarter of all video streaming services are used by multiple households. This includes a family or friend sharing the account they pay for outside the household or, less frequently, multiple households sharing the cost. And 16% of all households have at least one service that is fully paid for by someone else, according to the Leichtman Research Group study. This rises to 26% for 18 to 34 year olds.
Sharing or stealing passwords from streaming services cost about $ 2.5 billion in revenue in 2019 according to the most recent data from research firm Park Associates, and that number is expected to reach nearly 3.5 billion. billion dollars by 2024.
This may be only a small fraction of the $ 119.69 billion that eMarketer predicts people will spend on video subscriptions in the United States this year. But subscriber growth is slowing and costs are rising.
Companies are investing sky-high sums to produce their own original films and shows and set themselves apart from their competitors. Disney + has said it will spend up to $ 16 billion a year on new content for Disney +, Hulu and ESPN + by fiscal 2024. Netflix is expected to spend $ 19 billion on originals this year, estimates the Bankr research firm.
“Programming expenses double, or in some cases triple and quadruple, so you have to fund them somewhere.” Said Amobi from CFRA. “Most departments expect losses for the next few years before they break even. So they can use whatever subscriptions they can get. “
Another way to fund all this new programming is to raise prices. Netflix increased the price of its most popular plan by $ 1 last October, to $ 14 per month. Disney + followed in March with its own increase of $ 1 per month, to $ 8.
Josh Galassi, a 30-year-old Seattle resident who works in public relations, says everyone he knows shares passwords. If businesses start cracking down, he said he would subscribe to the services he uses, but only if shows he likes are on the service, like “The Good Fight” on Paramount +. He does this with Starz’s “Outlander,” subscribing only while the show is on, and then canceling himself.
“One rule I have is that I only share passwords with close friends or family,” Galassi said. “Or someone I know who has a service I don’t want to pay for, I’ll ask if he’s willing to share in exchange for something I’m paying for.”
Netflix played down its March user verification test, telling investors it was an ongoing effort and nothing new. Company co-founder and co-CEO Reed Hastings has vowed not to make too sudden changes for clients.
“We would never launch something that looks like ‘turning the screws’,” Hastings said in a phone call with analysts in April. “It has to make sense to consumers that they understand.”