By: Karen Ring, Head of Research at Telaria
While streaming companies like Netflix may downplay the impact of widespread password sharing on their revenue and growth, the fact is that 40 percent of Millennials, and more than a quarter of Gen Xers, share passwords to access streaming video services. Additionally, estimates from broadcast research firm Frank Magid & Associates show that acquisition of new U.S.-based customers for some streaming services has slowed. Streaming services that rely on paying subscribers as a sole means of monetization should be paying close attention.
Inside the minds of password sharers and borrowers
It’s worth spending some time understanding consumers’ thoughts on password sharing (those paying for the service and giving out their logins) and borrowing (those using someone else’s account). Telaria and Adobe Advertising Cloud’s “Inside the Minds of Cord-Cutters and Cable-Keepers” study shows there’s little remorse amongst password sharers across age groups; Only 11 percent of consumers who share or borrow passwords have an issue with doing so. The overwhelming majority (89%) have no issue with it or feel ambivalent about password sharing. Among the group who does harbor some feelings of guilt for password sharing, 12 percent of sharers take issue with password sharing, which is more than the 8 percent of password borrowers who feel the same way. Although both groups show low levels of discomfort overall, it’s interesting that those who are paying for the service feel slightly more ill at ease with sharing accounts.
Reasons for password sharing are myriad
There are a multitude of reasons why password sharing is so common and shows no sign of abating. Password sharing can be social currency – people share their streaming service passwords with friends and family who want to watch the latest show everyone is talking about at virtually no added cost to them. On the flip side, consumers don’t demonstrate any level of concern for the companies that provide the entertainment. Case in point: when asked if they consider password sharing an ethical issue, one 24-year old interviewed for the study said “I would never care about a corporation ethically like that. I would never think about that.”
Confusion can also play a role in password sharing because some viewers are simply not aware that password sharing is not allowed. Services like Netflix and Hulu allow for multiple users under a single account so many people assume sharing a password is the norm. Knowing when to draw the line when it comes to sharing passwords can get fuzzy. It’s understandable for a mother and daughter to share an account but how about a roommate or a cousin twice removed?
Another reason for password sharing’s prevalence is because it’s easy to do and few companies have cracked down on the practice. On the one hand, password sharing boosts scale for streaming companies and can help amplify the buzz around original content. Also, if someone is letting a few of their friends use their account, they might be less likely to cancel their subscription because the perceived value for money is greater. From a tech standpoint, there are limitations to validating who a user is if they’re switching between devices. Companies would need to invest significant resources if they want to put a stop to password sharing.
The root cause of password sharing goes back to the unrealistic expectation that consumers will subscribe to (and pay for) dozens of separate subscription-supported streaming services. Subscription fatigue is real and password sharing is a manifestation of that growing concern. Today’s consumers are wondering why should I pay for multiple streaming services when I can pay for one and share passwords with my friends and family who subscribe to the others I want access to? For most consumers, the question of ethics doesn’t apply to the password sharing phenomenon and streaming companies need to understand this line of thinking to determine how they structure future monetization models. Subscriber logins may not be adequately accounting for all viewership, as password sharing obscures who is actually watching a program, posing problems for marketers looking to target specific audiences. Measurement services cannot solely rely on subscriber counts for accurate predictions of scale or potential reach. Just how strictly should password sharing be regulated if it results in headwinds against driving growth?
For now, the key question seems to be does the growth in audience derived from password sharing compensate for the revenue lost from non-paying viewers? Given the lack of concern from the streaming companies, the answer appears to be yes. Technical difficulties aside, convincing non-paying users, who are used to getting content for free, to fork over dollars may be the biggest challenge ahead.