Streamers Lose Billions to Password Sharing, But ‘There’s No Easy Solution’ to the Problem

Execs balk at punitive measures as consumers swap credentials

Disney+, Netflix, HBO, Hulu and Amazon
Password sharing results in a lot of subscription revenue left on the table for streamers like like Disney+, Netflix, HBO, Hulu and Amazon. Illustration: Trent Joaquin; Source: Disney, Netflix, HBO, Hulu, Amazon

Geeta Bharathi, an account executive at the PR agency LaunchSquad, streams shows and movies on Amazon Prime Video, Hulu and Netflix. But she doesn’t pay for subscriptions to any of them. Instead, Bharathi uses the login information from her immediate and extended families, who have agreed to divvy up responsibility for different services and share credentials with each other.

“My parents get Hulu, my cousin’s parents get Netflix, and my sister has the Amazon Prime account,” Bharathi said. “And then me and my cousin will pay for HBO, but we only buy it for part of the year when stuff that we’re watching is on.”

Bharathi calls her personal streaming bundle her “self-made family plan,” and the arrangement comes with few downsides. In exchange for occasionally having to swap texts with relatives to get a password or a two-factor authentication code, Bharathi is able to keep her subscription costs low while still being able to stream whatever she wants.

“Everyone I know has these weird account-sharing situations,” Bharathi said. “Some people are saying that if you’re stacking subscription costs and you’re paying for six or seven subscriptions, that’s suddenly comparable to the price of a cable bundle. But for most people that I know, you’re probably paying a fraction of the cost.”

Bharathi’s family’s arrangement breaks the official rules of streaming services like Amazon, HBO and Netflix, which limit sharing to a single household under one roof. But her setup isn’t unusual. In the golden age of streaming television, consumers are frequently swapping and sharing streaming passwords to watch shows on different services without having to pay for their own accounts. A consumer survey from the research firm Magid conducted in August found that 23% of respondents accessed streaming video content using a shared password. (The survey did not break out how many people sharing passwords lived under the same roof.)

For media companies, that’s a lot of subscription revenue left on the table. The research firm Parks Associates projected that password sharing will cost media companies $6 billion this year, a figure that will increase to $9 billion by 2024, Bloomberg recently reported.

While the industry agrees something needs to be done, some executives feel their hands are tied when it comes to cracking down on the practice. Implementing safeguards might make accessing services more cumbersome, angering customers who can easily leave for another service on the market.

“The problem is, it’s so easy to share, but putting rules in place is really anti-consumer and is going to be really problematic,” said Rich Greenfield, co-founder and partner at the research firm LightShed Partners. “There’s no easy solution.”

The ‘balancing act’ for streaming services

Password sharing is top of mind for WarnerMedia CEO John Stankey, who is readying the streaming service HBO Max for a May 2020 premiere. Addressing sharing will require “a balancing act” as the company determines the right approach to maximize subscribers without frustrating customers, he said last month at an investor day for HBO Max.

“I don’t think you want it to be punitive where you damage customers, but at the same time as growth taps out and everybody’s more cognizant of this, the industry’s going to come up with a mechanism that’s maybe a little more rigorous than what we see today,” Stankey said.

Disney+, which premiered Nov. 12, will monitor for signs of rampant password sharing as the service gets off the ground, said Michael Paull, Disney’s president of streaming services, but there aren’t any plans to punish customers outright for password sharing.

“We do recognize password sharing exists and will continue to exist,” Paull said. “We have created some technology that’s in the backend to understand behavior, and when we see behavior that doesn’t make any sense, we have mechanisms that we put in place that will deal with it.”

Netflix CEO Reed Hastings has long embraced password sharing as a marketing mechanism and “a fact of life” for his company. More recently, though, the company has acknowledged the issue requires a closer look. During an October earnings call, chief product officer Greg Peters said the company would consider “consumer-friendly ways” to address excessive password sharing, but that Netflix had no plans to announce major changes.

So far, services have settled on one approach: using concurrent stream maximums to limit the number of users who can feasibly share an account. Disney+’s max is four, Hulu’s is two (unless customers pay extra as part of a Hulu + Live TV subscription), HBO’s is three. Netflix, which offers varying concurrent stream maximums at different prices, has a maximum of four.

In at least one instance, the strategy has worked: After running into issues watching Netflix at the same time, Bharathi’s family upgraded its subscription to allow for more authorized users, Bharathi said.

Standardizing password sharing

As more streaming services enter the market, ancillary tools are cropping up to make password sharing and personalized bundle building easier. Chino Lex, an app developer and entrepreneur, is building a tool called Keyring that allows users to share various subscription services with each other and split the cost, allowing multiple people to access various services without having to maintain individual accounts.

“What we’re finding is that younger people, like Gen Z and the younger end of millennials, wouldn’t have subscribed to a service if they didn’t share,” Lex said. “They’re becoming customers who wouldn’t be otherwise.”

Younger consumers are particularly keen on saving cash where they can, said Lex, who, for the record, pays for a Showtime account, shares Hulu and Amazon Prime with roommates and uses an ex-girlfriend’s Netflix account with her permission. Lex emphasized that the tool, which is slated to debut by next spring, is intended for household use among roommates and partners, which wouldn’t violate various services’ terms on sharing.

All that password sharing, though, is prompting the industry to take more aggressive steps to crack down on the practice. This fall, the Alliance for Creativity and Entertainment, a trade group focused on addressing online piracy that counts cable companies and streaming services as members, said it had created a working group focusing on addressing unauthorized access to streaming services, including “improper password sharing.”

It’ll be a tough balance to strike, especially because light password sharing can actually benefit streaming services in the long run. After all, it’s free marketing, executives have said.

If someone gets hooked, they’re all the more likely to consider that streaming service essential, whether they’re currently paying for it or not. “What’s the right balance between people being exposed to the product and giving them the value where they want to come in and actually use it?” Stankey said earlier this year.

Greenfield said media companies looking to place limits on where and how people can watch—for example, by mandating connecting to home Wi-Fi, which some cable companies and services like Hulu’s Live TV offering require—will only anger consumers and give them a reason to cancel outright and find services that are less frustrating to use. The best path forward, Greenfield said, is to make content so compelling that people feel like certain streaming services are must-haves.

“If there’s only one or two shows that you really care about, people are going to find a way to password share,” Greenfield said. “They’re going to find a way to come on and come off [services] really quick. The only way you are going to succeed is if you create addicts, where people literally feel like they cannot live without your service.”

However, when it comes to cracking down on sharing, there’s one easy initial step media companies could take: requiring users to periodically reenter login information. Bharathi, for instance, has been using another person’s HBO subscription for years, even though she and her cousin shelled out the cash for a subscription the rest of the family could use.

“At some point when we moved to New York, my cousin’s best friend’s brother’s girlfriend logged in to our Apple TV,” Bharathi said, laughing. “I’m pretty sure it was at the end of 2017, but we’ve never had an issue getting logged out of it. So here we are, almost at the end of 2019, and we’re still watching HBO through my cousin’s best friend’s brother’s girlfriend’s account.”

@kelseymsutton Kelsey Sutton is the streaming editor at Adweek, where she covers the business of streaming television.