The loss of revenue from password sharing is expected to cost streaming services several billion dollars a year.
As children, many of us were taught to share. Netflix, Amazon, and Disney+, among other streaming providers, now want us to quit.
This is the new rule from the streaming media behemoths, who hope to deter the usual habit of sharing account passwords while not alienating subscribers who have become accustomed to the breach.
The loss of revenue from password sharing is projected to cost streaming services several billion dollars a year. That’s a minor issue currently for a $120 billion-a-year industry, but it’s one that needs to be addressed as spending on unique new programming soars. The first season of Amazon’s anticipated “Lord of the Rings” series is expected to cost $450 million, more than four times the cost of a season of HBO’s “Game of Thrones.”
“To be honest, the industry has been moving in that direction. Tuna Amobi, a CFRA analyst, stated, “It’s a question of when not if.” “With these new arrivals, the environment appears to be relatively fixed, so now seems like a good moment to get a much better hold on subscribers.”
It’s a delicate balancing act. By creating profiles or giving tiers of service with varied amounts of screen sharing allowed, video firms have long offered acceptable means for many users to use a service. More consumers might bite the bullet and pay full price for their own subscription if password sharing limitations are imposed. However, a restrictive response may alienate users and drive them away.
Some Netflix users began receiving popups in March requesting them to verify their accounts by entering a number supplied to them through email or text, with the option to verify “later.” Netflix did not specify how many people were involved in the test or whether it was just conducted in the United States.
“They’re going to approach it with caution,” Amobi remarked. “When done incorrectly, a maneuver like this always has a drawback.”
The test takes place at a critical juncture for Netflix. The subscription increase that was fuelled by the epidemic last year is diminishing. With more than 200 million customers worldwide, it is still the streaming service to beat. However, a slew of new competitors have emerged, notably Disney+, which is less expensive and has racked up 100 million users in under two years.
When Disney+ was first announced in 2019, then-CEO Bob Iger stated that the program was built around sharing.
In a CNBC interview, he said, “We’re setting up a service that is really family-friendly, and we want families to be able to use it — four live streams at a time, for example.” “We’ll keep a close eye on it with the different tools, technical tools, that we have at our disposal to keep track of it. But it’s clear that we need to keep an eye on it.”
According to the Pew Center for Internet and Technology, over two out of every five online people have shared passwords for online accounts with friends or family members. It’s much higher among millennials: 56 percent of Internet adults aged 18 to 29 have swapped passwords.
“With the cost of all the streaming platforms combined equaling a cable bill — which it was meant to eliminate,” Ryan Saffell, 39, an IT director from Las Vegas, said, “I believe it’s a terrific thing to be able to share your login to help family and friends save a few bucks.”
streaming services are used by several homes, according to another survey. This could be a family member or friend paying the cost of an account they pay for outside of the home, or it may be numerous homes spreading the expense. According to Leichtman Research Group’s survey, 16 percent of all homes have at least one service that is totally paid for by someone else. For those aged 18 to 34, the percentage rises to 26%.
According to the most recent data from research firm Park Associates, sharing or stealing streaming service passwords cost an estimated $2.5 billion in revenue in 2019, and that figure is anticipated to climb to roughly $3.5 billion by 2024.
That might be a small portion of the $119.69 billion eMarketer forecasts will be spent on TV subscriptions in the United States this year. However, subscription growth is stagnating and costs are rising.
Companies are spending huge amounts of money to create their own unique films and television shows in order to differentiate themselves from their competition. By fiscal 2024, Disney+ expects to spend up to $16 billion per year on new content for Disney+, Hulu, and ESPN+. According to Bankr, Netflix is anticipated to spend $19 billion on original content this year.
Netflix downplayed the March user verification test, telling investors that it was only part of a larger initiative.