Streaming services seeking ways to cut password sharing

Susan Wojcicki, chief executive of YouTube, speaks during the introduction of YouTube TV in Los Angeles in 2017. Streaming services ranging from Netfl ix to Disney+ and others want customers to stop sharing passwords.
(AP)
Susan Wojcicki, chief executive of YouTube, speaks during the introduction of YouTube TV in Los Angeles in 2017. Streaming services ranging from Netfl ix to Disney+ and others want customers to stop sharing passwords. (AP)

NEW YORK -- Streaming services ranging from Netflix to Amazon to Disney Plus 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 $120 billion annually, but something it needs to address as spending on distinctive new programming skyrockets. Production of Amazon's forthcoming "Lord of the Rings" series will reportedly cost $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 analyst Tuna Amobi of the Center for Financial Research and Analysis. "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 pop-ups asking them to verify their account by entering a code sent through 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 U.S. 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's still the streaming service to beat with more than 200 million subscribers globally. But several new competitors have emerged, including Disney Plus, which is cheaper and has quickly snapped up 100 million subscribers in less than two years.

When Disney Plus started in 2019, then Chief Executive Officer 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% 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% for 18- to 34-year-olds.

Sharing or stealing streaming service passwords cost an estimated $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 $3.5 billion by 2024.

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

Companies are investing dizzying sums to produce their own original movies and shows and stand out from competitors. Disney Plus said it'll spend up to $16 billion a year on new content for Disney Plus, Hulu and ESPN Plus by fiscal 2024. Netflix is expected to spend $17 billion on original content this year, according to Business Insider.

"Programming spend is doubling, or in some cases tripling and quadrupling, so you have to fund it somewhere." Amobi said. "Most services are looking at losses for the next few years before they break even. So they can use every subscription that they can get."

Another way to finance all this new programming is to raise prices. Netflix raised the price of its most popular plan by $1 last October, to $14 a month. Disney Plus followed in March with its own $1 a month increase, to $8.

FILE - In this Monday, March 25, 2019, file photo, Apple CEO Tim Cook speaks at the Steve Jobs Theater during an event to announce new products, including Apple's steaming TV, in Cupertino, Calif. Streaming services ranging from Netflix to Amazon to Disney+ and others want us to stop sharing passwords. That's the new edict from the giants of streaming media, who are looking to discourage the common practice of sharing account passwords without alienating subscribers who've grown accustomed to the hack. (AP Photo/Tony Avelar, File)
FILE - In this Monday, March 25, 2019, file photo, Apple CEO Tim Cook speaks at the Steve Jobs Theater during an event to announce new products, including Apple's steaming TV, in Cupertino, Calif. Streaming services ranging from Netflix to Amazon to Disney+ and others want us to stop sharing passwords. That's the new edict from the giants of streaming media, who are looking to discourage the common practice of sharing account passwords without alienating subscribers who've grown accustomed to the hack. (AP Photo/Tony Avelar, File)
FILE - This Aug. 13, 2020 file photo shows a logo for Netflix on a remote control in Portland, Ore. Streaming services ranging from Netflix to Disney+ want us to stop sharing passwords. That's the new edict from the giants of streaming media, who hope to discourage the common practice of sharing account passwords without alienating their subscribers, who've grown accustomed to the hack. (AP Photo/Jenny Kane, File)
FILE - This Aug. 13, 2020 file photo shows a logo for Netflix on a remote control in Portland, Ore. Streaming services ranging from Netflix to Disney+ want us to stop sharing passwords. That's the new edict from the giants of streaming media, who hope to discourage the common practice of sharing account passwords without alienating their subscribers, who've grown accustomed to the hack. (AP Photo/Jenny Kane, File)
FILE - In this Wednesday, Nov. 13, 2019, file photo, a Disney logo forms part of a menu for the Disney Plus movie and entertainment streaming service on a computer screen in Walpole, Mass. Streaming services ranging from Netflix to Disney+ want us to stop sharing passwords. That's the new edict from the giants of streaming media, who hope to discourage the common practice of sharing account passwords without alienating their subscribers, who've grown accustomed to the hack. (AP Photo/Steven Senne, File)
FILE - In this Wednesday, Nov. 13, 2019, file photo, a Disney logo forms part of a menu for the Disney Plus movie and entertainment streaming service on a computer screen in Walpole, Mass. Streaming services ranging from Netflix to Disney+ want us to stop sharing passwords. That's the new edict from the giants of streaming media, who hope to discourage the common practice of sharing account passwords without alienating their subscribers, who've grown accustomed to the hack. (AP Photo/Steven Senne, File)
FILE - In this Monday, March 25, 2019, file photo, Apple CEO Tim Cook at the Steve Jobs Theater during an event to announce new products, including Apple's Streaming TV, in Cupertino, Calif. Streaming services ranging from Netflix to Amazon to Disney+ and others want us to stop sharing passwords. That's the new edict from the giants of streaming media, who are looking to discourage the common practice of sharing account passwords without alienating subscribers who've grown accustomed to the hack. (AP Photo/Tony Avelar, File)
FILE - In this Monday, March 25, 2019, file photo, Apple CEO Tim Cook at the Steve Jobs Theater during an event to announce new products, including Apple's Streaming TV, in Cupertino, Calif. Streaming services ranging from Netflix to Amazon to Disney+ and others want us to stop sharing passwords. That's the new edict from the giants of streaming media, who are looking to discourage the common practice of sharing account passwords without alienating subscribers who've grown accustomed to the hack. (AP Photo/Tony Avelar, File)

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