How Netflix and Disney Are Dealing With the Costly Problem of Password Sharing netflix free account 2020
If you’re one of the millions of people still stealing your ex-roommate’s cousin’s Netflix password, the free ride might not last forever.
Days ago, a new report by research firm Parks Associates estimated that streaming services collectively lost $9.1 billion from password sharing last year, and projected that this figure will increase to $12.5 billion by 2024. The estimates highlight a growing conundrum that Netflix and others face as competition in the streaming market heats up in 2020 and beyond.
To date, Netflix has taken a largely hands-off approach to password sharing outside of households. CEO Reed Hastings even said in 2016 that the widespread practice is “a positive thing, not a negative thing” for Netflix on the idea that it serves as free marketing for its content.
“They’ve said very specifically that it helps drives subscriptions over time. How well does that work? Only Netflix knows,” said Frost & Sullivan analyst Dan Rayburn.
MoffettNathanson estimated last summer that 14% of U.S. Netflix viewers are using a password from outside of their households, a percentage that implies the streaming giant may be losing out on billions in annual revenue by allowing the free rides. But with the competitive field growing more crowded, Netflix could someday face pressure from some of its investor base to stop leaving money on the table.
On an October earnings call, Netflix product chief Gregory Peters didn’t disclose any specific plans to combat password sharing, but suggested there are “consumer-friendly ways to push on the edges of that.”
That speaks to a fundamental problem for Netflix when it comes to the possibility of a password crackdown, Rayburn added.
“Can they do things to limit it? Yes,” he said. “But can you imagine what the backlash would be from a brand negativity standpoint if they just came out and said you can’t share passwords anymore? They have a reputation in the market as a friendly, awesome company, and they would lose that overnight if they did something drastic.”
Depending on your plan, Netflix imposes limits on simultaneous streams from a single account, but does not have any specific limits on account logins across devices. Disney , meanwhile, allows four simultaneous streams and up to ten authorizations of the Disney+ mobile app. While there are no set limits on how many devices one can use with a single account, per se, Disney executives have said that it monitors usage patterns using back-end tools and has mechanisms to deal with oversharing if it arises.
Likewise, AT&T WarnerMedia CEO John Stankey suggested last year that the company could place caps on password sharing, in some form or another, when it launches HBO Max in May 2020.
“When we see 14 locations logged into HBO on a Sunday night with 16 different streams going, we’re aware of those things. As growth taps out, I think the industry will come up with a method that’s a bit more rigorous,” Stankey said at WarnerMedia’s HBO Max unveiling in October 2020.
With streaming players facing more competition this year — in addition to HBO Max, Comcast’s Peacock is due to launch this April — the companies in the mix are seeking to strike the right balance between ensuring their content gets seen and making progress towards revenue targets. Investors may soon take a more critical look at the assumption that unfettered password sharing is good for business.
In Netflix’s case, investors worried throughout the second half of 2020 that subscriber growth in the U.S., its largest and most mature market, has tapped out — and that it’ll only get harder from here on out to acquire new subscribers.
As the largest and most established streaming incumbent, we’ll find out soon if nabbing subscribers means cutting off the freeloaders.
This article was originally published by TheStreet.