Why password sharing is a big deal for streamers

The website promised tempting offers.

A seller has offered 10 days of access to Netflix in Ultra HD for just $1, well below the regular cost of $19.99 per month for a Netflix premium account.

Another seller offered access to HBO Max, home to critically acclaimed shows such as “Mare of Easttown” and “Succession,” for just $1.09 per month, up from $14.99 per month.

Someone else was offering a Disney+ subscription (usually costing $7.99 a month) for as little as 90 cents.

Satisfied customers responded with rave reviews: “Five stars again”, “Excellent”, “All good”. I’m satisfied, keep it up man.

As competition for customers between streaming services intensifies, the proliferation of online marketplaces where passwords are sold illegally at ridiculous prices is intensifying, according to the companies that handle digital content protection for streaming services. Hollywood studios.

These illicit markets have sprung up in response to the popularity of password sharing – which has become a growing headache for streamers who depend on subscription revenue to fund the rising cost of producing content.

The losses are significant. Account sharing and hacking cost streamers and pay-TV providers $9.1 billion in lost revenue in 2019. That figure is expected to rise to $12.5 billion in lost revenue by 2024, according to market research and consulting firm Parks Associates.

Some experts say these estimates are conservative. A Citi analyst estimated that streaming services lose around $25 billion a year from password sharing, with Netflix accounting for 25% of that amount.

“In the past, sharing credentials was tolerated as a form of increasing your audience, brand popularity and service,” said Ken Gerstein, vice president. sales at NAGRA, a Swiss company that advises streamers and others on anti-piracy. measures. “But there’s a point where competition starts to limit growth… We’re seeing a tipping point that’s starting to have such an impact on subscriber growth, it’s forcing streamers to start taking action.”

Last month, Netflix took an important step to crack down on the sharing of passwords between people who don’t live in the same house. The Los Gatos, Calif.-based streamer said it was testing features that would allow subscribers in Chile, Costa Rica and Peru to add up to two users outside of their household, for 2 or 3 additional dollars per account.

While Netflix’s subscription plans are popular, there has been confusion among consumers about when they can be shared, executives say.

“As a result, accounts are split between households, which impacts our ability to invest in new TV shows and movies for our members,” Chengyi Long, director of product innovation at Netflix, wrote in a statement. blog post last month.

She added that the company would monitor the tests before rolling them out to other countries.

Last year, Netflix also tested a prompt during the sign-in process that would remind some non-paying viewers that if they don’t live in the same house as the account holder, they should get their own Netflix subscription.

For many years, Netflix and other streamers didn’t seem to mind password sharing – and even seemed to tolerate it. In 2017, the company tweeted that “love is sharing a password”.

But the company’s tolerance for the practice has changed as the company faces increased pressure to grow its subscriber base and increase its profitability in the face of increasing competition.

The announcement came after Netflix said it expected slower subscriber growth. The streamer expects to add 2.5 million subscribers in the first quarter, up from 4 million subscribers a year earlier.

“There’s a lot of pressure to figure out what to do with existing users and existing subscribers to maximize the financial health of how this base is operated,” said Paul Erikson, research director at Parks Associates.

Hackers have exploited the casual sharing of passwords by selling individual credentials on marketplaces such as the one surveyed by The Times or by creating their own streaming service and illegally stealing popular shows from platforms such as Netflix and Disney+.

At the same time, password sharing has taken off during the pandemic as consumers spend more time at home streaming.

“We’ve seen an increase over the last few years, especially under COVID, as more people subscribe to streaming services compared to traditional pay TV,” Gerstein said. “One of the behaviors we observed was that with subscription stacking, it started to become costly for consumers, and hackers saw an opportunity in credential theft or hijacking.”

Many streaming services, such as Netflix and HBO Max, have guidelines that specify that each account is for one household, that is, people who live in the same residence. But some consumers have a broader definition of household — to mean relatives who don’t live in the same house or friends who want to check out the sci-fi series “Stranger Things” without paying a full monthly subscription.

The people who tend to share passwords are between the ages of 18 and 24, according to a study by the Advertising Research Foundation that surveyed 10,400 adults. Younger consumers may be more cash-strapped and are looking for ways to save money by paying for multiple streaming services, although they face security risks, especially if they use the same password for other services like a bank account, industry experts said.

ARF research director Paul Donato said the number of people sharing Netflix and Disney+ passwords tends to be higher than for other services, such as ESPN+, because they offer content for a general audience and appeal to families. Netflix is ​​also more expensive than ESPN+’s $6.99 monthly plan, Donato said.

The study indicates that 36% of Netflix subscribers share their password with at least one relative outside their household, while 13% share their password with a friend outside their household.

By comparison, 32% of Disney+ subscribers share their password with a relative outside their household, followed by 13% who share it with at least one friend who doesn’t live with them, according to the study. That compares to just 16% of ESPN+ subscribers sharing their password with a relative who didn’t live with them and 7% with a friend, according to the study.

“ESPN is very focused, you’d have to be sporty, whereas Netflix is ​​much more general, covers pretty much every genre,” Donato added.

Although some analysts hailed Netflix’s crackdown on password sharing as a necessary step, some consumers balked, citing rising costs. In January, Netflix increased the cost of some of its plans, including its premium monthly plan from $2 to $19.99.

It’s unclear if other streaming services will follow Netflix’s actions on password sharing. Disney+ and HBO Max declined to say, while Apple TV+ and Amazon did not respond to a request for comment.

Two-factor authentication is one of the methods streamers use to restrict password sharing. So, when a user logs into their account on a new device, a prompt will ask for a separate code that can be sent to the account holder’s cell phone. If the person no longer lives in the household – say an ex-boyfriend – they are unlikely to call the account holder to ask for the code.

If customers share their passwords with people outside their household, the streaming service probably already knows about it, said Jonathan Friend, product manager of Birmingham, UK-based Friend MTS, which provides security services. content protection. Stream services can discover patterns, such as when a client connects from multiple locations.

“Streaming companies are very sophisticated technology service providers,” Friend said. “So it’s fair to say that the majority of these platforms will know what’s going on.”

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