Nearly one-fifth (18%) of all U.S. subscribers to cable or streaming services report using another household’s password and 18% report sharing a password with another household, according to data from Interpret’s VideoWatch.
Another 9% of consumers indicate that they split the cost of a single subscription service and then share that service’s password with other households.
Password sharing has taken center stage after Netflix in a recent financial report blamed it for poor results. Netflix executives are looking at an ad-based tier to give consumers a lower-priced option. Given that 48% of Netflix subscribers watch ad-supported content from other streaming providers, an ad-based version of Netflix could be a winner, according to Interpret.
Netflix’s foray into ad-supported subscription streaming video could be a reality after October. The streaming behemoth last month announced it was considering the move after it lost 200,000 net subscribers globally and projected another 2 million sub loss in the current quarter, ending June 30.
Now The New York Times, citing sources familiar with the situation, said that senior Netflix management, in a note to staffers, said it wanted the less expensive ad-supported subscription plan up and running in the final three months of the year.
Co-founder and co-CEO Reed Hastings, on the company’s most recent earnings call, said the streamer was looking into an ad-supported option. The news was unexpected, since Hastings and other executives have long stated an aversion to including advertising on the platform and its 221 million global subs.
But that was before Netflix saw more than $50 billion in market valuation wiped out as investors dumped shares following the Q1 financial results, which included a $100 million decline in quarterly profit.
“Yes, it’s fast and ambitious and it will require some trade-offs,” read the Netflix note, per TheTimes. “Every major streaming company excluding Apple has or has announced an ad-supported service,” the note said. “For good reason, people want lower-priced options.”
And Netflix wants incremental ad revenue.
The streamer is also looking for incremental revenue gains by charging subscribers who share their account with third parties. Like advertising, Netflix had long turned a blind eye to password sharing — considering the practice organic marketing. But that mindset, too has changed.
“So, if you’ve got a sister, let’s say, that’s living in a different city; you want to share Netflix with her, that’s great,” Greg Peters, Netflix’s chief operating officer, said on last month’s fiscal call. “We’re not trying to shut down that sharing but we’re going to ask you to pay a bit more to be able to share with her.”
Peters said Netflix plans to launch the password sharing option in about a year after testing the concept.
With Netflix testing charging subscribers in Chile, Costa Rica and Peru a reduced fee if they share passwords with third parties, the streamer is attempting to put a lid on a growing trend: password mooching.
While Netflix initially encouraged password sharing as an organic way to entice subscriber growth, with the SVOD behemoth now realizing lower quarterly net sub adds, new data from Cordcutting.com estimates the service will lose more than $790 million in membership revenue this year due to password sharing — tops among all SVOD services.
Other streaming platforms such as HBO Max, Disney+ and Hulu will lose $477 million, $440 million and $436 million, respectively. That “breakage” revenue collectively tops $2.3 billion in annual membership revenue lost when including Paramount+, Amazon Prime Video and Peacock.
Of the 215 million people in the U.S. using SVOD services, the report contends 25% are using someone else’s paid-for account. Indeed, the average account borrower accesses up to two, third-party accounts, which equates to almost 86 million shared accounts.
The report, citing a survey of 790 U.S. adults early this year, found that the most-shared accounts include HBO Max, Disney+ and Amazon Prime Video. Among survey respondents, Netflix remains the overwhelming favorite platform with 92% market share.
As platforms attempt to clamp down on password sharing, the report found that among moochers unable to access third-party SVOD accounts, 45% would pay for Paramount+, followed by 38% paying for Peacock, 31% for Hulu, 30% for Netflix, 26% for HBO Max, 25% for Disney+ and 21% for Prime Video.
“The vast majority of American adults watch streaming platforms, and even though most people are no longer isolating at home [due to the pandemic], it’s reasonable to assume that we will still devote billions of minutes to our favorite streaming shows and movies in 2022,” read the report. “And as long as there is demand for streaming content, mooching (or sharing, if you prefer) will continue.”
With Netflix testing the concept of charging subscribers when they share passwords with up to two-third parties in Chile, Costa Rica and Peru, John Blackledge, analyst with Cowen & Co., believes the move could be a money maker for the SVOD behemoth when rolled out globally.
Blackledge believes Netflix could increase its annual revenue by 4%, or $1.6 billion, when enabling password sharing.
“We think Netflix’s recent efforts reflect a natural progression across more mature markets and could add incremental subs and revenue if the test is rolled out globally,” Blackledge wrote.
The analyst bases his projection in part on half of non-paying Netflix users becoming lower-paying ($2.99 monthly) subscribers. The streamer ended 2021 with 222 million paid subs worldwide, including more than 75 million in North America.
Blackledge also based his reports on an internal survey that found 42% of Netflix subs in the U.S. share a password, and 10% of respondents said they had access to the service without paying. That compares with 7% of survey respondents in a similar survey conducted in early 2017.
In addition to reportedly losing billions annually in lost revenue due to password sharing, new data suggests the black market for third-party login details and passwords is big business.
Credential sharing continues to be a hot topic as more businesses turn to subscription-based revenue models. Netflix’s recent efforts to mitigate exposure is the latest example. Red Points, a brand-protection services company, surveyed 1,000 U.S. adults to better understand if they sell their personal login details and passwords for streaming services such as Netflix, Hulu, Spotify, Twitch, Microsoft Office, Disney+, HBO Max and Peacock, among others.
Notably, 40% of respondents said they have resold their login details and password; out of those that are using someone else’s personal login details, 58% paid for the information online. Last November, data from KillTheCableBill.com found that a majority (54%) of Netflix subscribers share with friends outside the home.
Separate data from Citi Global Markets analyst Jason Bazinet contends the SVOD behemoth is losing about $6.2 billion each year from lost revenue when non-subs stream content using someone else’s password.
Red Points found that 51% of respondents said they are currently using someone else’s personal login details and passwords for streaming services. Another 40% said they have resold login details and passwords for streaming services, with 66% of 18-30-year-olds purchasing access to login details and passwords online.
About 65% respondents resell personal login and passwords information on social media; 64% resell on e-commerce websites; 56% resell on marketplaces; and 56% resell on end-to-end encrypted messaging sites.
Now it’s costing SVOD platforms big money. Around $300 million alone in lost 2020 revenue. New data from Swedish research group Mediavision found that 40% of (largely Netflix) SVOD subscribers in the Nordics (Sweden, Finland, Iceland, Norway and Denmark) admit to sharing a password to a standalone SVOD service with someone outside the household. Shared passwords are especially common among the younger users, with sharing up to 60% among subs under the age of 24.
“If all Nordic households sharing a SVOD service instead were to pay, approximately an additional EUR 250 million would have been added to total revenue for the full year 2020,” read the report.
Mediavision contends that password sharing has helped grow the SVOD market since consumer cost of entry remains relatively low.
“It could well be argued that sharing has been one of the reasons for the very quick transformation of the market by (unintentionally) enabling additional potential subscribers ease of access, and thereby increasing awareness,” read the report. “So far this seems to have served [the SVOD services] very well. But the times they are a changing.”
Netflix has quietly begun cracking down on the sharing of subscriber passwords among non-paying users. As the SVOD pioneer surpassed 203 million subscribers through 2020, so too has the market become crowded, adding tens of millions of subs each at industry newcomers Disney+, HBO Max and Peacock, among others.
Subscribers have begun seeing emails from Netflix reminding them about not letting non-subscribers use their password.
“If you don’t live with the owner of this account, you need your own account to keep watching,” read the email.
With a saturated market, Netflix’s ability to grow its subscriber base — key to sustaining content spend and stock valuation among investors — is slowly being undermined by password sharing. More importantly, shared passwords reportedly cost Netflix as much as $135 million in lost revenue. Research firm Magid contends 33% of all Netflix customers share their password with at least one other person.
Currently, multiple users can share one account by setting up different viewing profiles using one login. Users must purchase premium plans to watch Netflix on more than one screen.
Back in 2019, Greg Peters, chief product officer and chief technology officer, said Netflix was looking for ways to limit password sharing. As a result, the service is testing select subscribers nationwide to address password sharing.
“This test is designed to help ensure that people using Netflix accounts are authorized to do so,” a spokesperson said in a statement.
Charter Spectrum joined other pay-TV distributors reporting ongoing subscriber losses of traditional linear video entertainment in the home.
The company Oct. 25 said it lost 77,000 video subs in the third quarter, ended Sept. 30. That compared with a loss of 66,000 subs in the previous-year period.
The service has jettisoned 415,000 video subs in the past fiscal year, ending the period with 15.7 million.
Charter did add 351,000 broadband subscribers, underscoring ongoing consumer migration towards over-the-top video services such as Netflix and online TV. It added 266,000 high-speed Internet subs during the previous-year period.
The service ended the period with 24.5 million broadband subs, up from 23.3 million subs a year ago.
With the onslaught of high-profile SVOD services from Disney and Apple, in addition to WarnerMedia early next year, CEO Tom Rutledge was asked about the growing industry concern regarding the sharing of user passwords among non-subscribers.
Without naming offending OTT services, Rutledge alluded to third-party streaming services affording simultaneous access to five separate users with no location-based security.
“I feel like I’m beating my head against the wall talking about privacy or piracy, password sharing and pricing, but they’re all inter-related issues,” Rutledge said on the fiscal call.
He criticized content creators entering the distribution market seemingly indifferent to where their programming is going.
Indeed, Netflix, which has heretofore turned a blind eye toward password sharing, has begun looking into the practice.
“It has not been part of their DNA [worrying about it],” Rutledge said. “Most households in the United States have two or less people in them. And as a result of that, there are more streams available [for free] than there are households.”
The executive contends that until there is increased scrutiny on video access in and out of the home on a single account, “it’s just too easy to get the product without paying for it.”
“When we look at data consumption, we can see that video consumption isn’t going down even when people disconnect their paid video,” Rutledge said. “And as a result of that, it makes the [subscription] price value relationship really difficult when it’s free.”
Separately, Rutledge said Spectrum was considering partnering with Comcast’s Flex SVOD service for broadband-only subscribers.
Charter several years ago bowed Spectrum TV Plus, a $12.99 monthly online TV service for its broadband-only subs. The service included a free Roku player.
In 2018, the service was changed to $14.99 Spectrum TV Plus. Last year Charter unveiled “TV Essentials,” a $15 monthly “skinny bundle” option for pay-TV subs.
“We have a significant number of app based relationships that we’ve developed on multiple devices, and that strategy is working for us,” Rutledge said. “And putting inexpensive devices out with your service makes some sense to us.”
With Netflix having largest SVOD subscriber base in the United States and globally, conventional wisdom suggests the sharing of passwords among subs would be problematic.
Not so, according to new data from Ampere Analysis, which contends sharing of passwords among Netflix subs is less than 10%. The report found that password sharing among Netflix subs remains low globally — even in regions historically rampant in content piracy.
Ampere found that password sharing among Amazon Prime households (about 22% of U.S. households) greatly exceeds Netflix households (25%) — a factor the research firm attributed to Prime’s overarching ecommerce component.
In addition, the report found that a vast majority of Amazon Prime and Netflix households (97%) are not multi-user streaming video households.
“There is a widely-held belief that password sharing among Netflix homes is rife, but our data is telling a different story,” Guy Bisson, research director at Ampere, said in a statement.
Moving forward, it looks as if password sharing is a fact of life for SVOD players, with Amazon too suffering from account sharing for its Prime Video service.
Bisson said the 9% password sharing among Netflix households represents a revenue opportunity for the SVOD leader.
“Netflix has a potential revenue gain that can be switched on at will by locking down account sharing, but it’s more likely to be seen as an additional — and likely very effective — marketing and subscriber acquisition cost,” he said.