Password Sharing Costs Streaming Services Millions In Revenue

Younger users who are sharing their passwords to streaming services such as Netflix, Hulu and Amazon are costing these companies millions of dollars in revenue each year.

“The cat is out of the bag,” said Jill Rosengard Hill, executive president at media research firm Frank N. Magid, in an interview with CNBC. “I wish I had a solution, because it’s really hurting the business model and monetization of these premium high value services.”

According to research by Magid, 35 percent of millennials share passwords for streaming services, compared to 19 percent of Generation X subscribers and 13 percent of Baby Boomers. In addition, 42 percent of post-millennials (aged 21 and younger) have reported sharing passwords, and are also more likely to share passwords among friends than older generations.

This can all add up to hundreds of millions of dollars in potential revenue that streaming companies aren’t earning. In fact, a recent financial report shows that Hulu loses around $1.5 billion a year.

But these companies have not seemed overly concerned about password sharing in the past. Netflix CEO Reed Hastings said in 2016 that password sharing “hasn’t been a problem,” while in 2014 HBO CEO Richard Pleper said, “It’s not that we’re ignoring it, and we’re looking at different ways to affect password sharing. I’m simply telling you: It’s not a fundamental problem.”

However, experts note that the issue is getting worse: “Millennials in particular want ease of access and ease of use on their dime at their convenience,” Hill said. “They’re embracing it — the ability to customize and curate their video portfolio or their video access.”

Currently, the terms and conditions of all the major streaming services note access to content is for personal use and not to be shared with others. But, if you do share, then the account holder is responsible for the actions of that third party and they ask that it is kept within the set limit of simultaneous streams.

It shows the companies’ unwillingness to police inappropriate sharing, said Daniel McCarthy, a marketing professor at Emory University.

“As we move away from an advertising-only revenue model towards people paying for subscriptions more, it has to carry with it the rise of sharing,” McCarthy told CNBC. “Companies like Hulu, they are under pressure right now because they are losing a lot of money.”