Before coronavirus struck, the streamers looked to have password sharing in their sights amid estimates that it was costing billions of dollars in lost revenue. The issue has gone quiet for now – but that is likely to change. 

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Piracy: Record 14% of U.S. Netflix viewers use passwords from outside their household

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Coronavirus lockdowns have led to a well-documented surge in the use of subscription video on demand (SVOD) services such as Netflix, Amazon Prime and Disney+. 

For millions of people who were stuck at home, SVODs like these have proved a vital service, providing escapism and enjoyment.  

“Our small contribution in these difficult times is to make home confinement a little more bearable,” said Netflix CEO and chairman Reed Hastings in April, as the streamer announced it had added a record 15.8 million subscribers in the first three months of 2020. “Right now, we’re just focused on getting our content out.” 

With lockdowns easing worldwide, this focus could be set to change – with a renewed attempt by Netflix and other streamers to tackle the problem of password sharing, an issue that is thought to cost SVODs billions of dollars in lost revenue each year. 

A Park Associates report last year said the pay-TV industry is projected to lose $6.6 billion in revenue from password sharing and piracy in 2020. By 2024, the number could grow to $9 billion, the research firm said. 

Currently, multiple users can share one SVOD account by setting up different viewing profiles using one login. Netflix and Disney+, for example, allow up to four users from one account, while HBO Max allows up to five and Apple TV up to six people.  

This is intended for users in the same household - but some share passwords with family and friends outside of their household. 

Analysts MoffettNathanson recently estimated that 14% of U.S. Netflix viewers are using a password from outside of their household.  

Younger people are most likely to do so. A Reuters/Ipsos poll reported that more than one-fifth of young adults who use streaming services borrow passwords from people who do not live with them.  

It was against this background that, in October last year, The Alliance for Creativity and Entertainment (ACE), an anti-piracy body, announced that it was stepping up efforts to crack down on password sharing. 

ACE is an anti-piracy spinoff of the Motion Picture Association of America (MPAA) whose members include Netflix, Amazon, HBO, Hulu, Disney, NBC Universal, Sky and Warner Bros.  

It announced a working group focused on reducing unauthorized access to content, specifically naming “improper password sharing.”  

“We are very pleased that ACE and its coalition of members have committed through this initiative to take on unauthorized password sharing and other content security practices, and we look forward to working together on this important issue,” said Tom Rutledge, chairman and CEO of telco Charter Communications, which is also a member of ACE. 

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Original content: With OTTs investing billions on new content they need to ensure growth and returns

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The importance of the password sharing issue was further underlined when Netflix signalled that it will prevent users from sharing accounts and restrict people from swapping passwords. 

Greg Peters, chief product officer at Netflix, announced in an interview for the streaming platform’s Q3 2019 earnings that it is looking for ways to limit password sharing. “We continue to monitor it so we’re looking at the situation,” said Peters. “We’ll see those consumer-friendly ways to push on the edges of that.” 

The sudden focus on password sharing marks an abrupt change in direction by streamers and pay-TV firms.  

Just a few years ago, password sharing wasn’t seen as a major issue. Six years ago, HBO’s then-CEO Richard Plepler said it had “no impact on the business” and is, in many ways, a “terrific marketing vehicle for the next generation of viewers.” Four years ago, Netflix CEO Reed Hastings commented, “Password sharing is something you have to learn to live with.” 

For much of this century, the content industry’s antipiracy focus has been on file-sharing. But now that streaming is seen as integral to the major studios’ businesses – with major launches from Disney, HBO, Warner Bros. and Apple in the past year – password sharing has risen up the agenda.  

The streamers themselves are investing billions of dollars on content. They are also under intense pressure from investors to deliver growth and returns in a highly competitive market. Against this background, it’s little wonder SVODs have become increasingly reluctant to overlook the amount of money lost each year to password sharing. 

Legal ACE 
For now, it is thought that ACE has no plans to take legal action against individuals who share passwords with family and friends.  

Instead, it is understood that ACE will work on technological measures limiting the number of devices that can simultaneously stream via a single account.  

“We continue to monitor [password sharing] so we’re looking at the situation,” Greg Peters, Netflix

Possible measures could include requiring customers to change their passwords periodically or texting codes to subscribers’ phones that they would need to enter to keep watching, according to reports. Measures could possibly include new rules governing which devices can be used to access a device outside the home. While someone logging in from a phone or tablet would be fine, someone using, for example, a Roku device at a second location could be considered likely to be using another person’s password. 

If none of those tactics work, pay-TV subscribers could perhaps be required to sign into their accounts using their thumbprints. 

Such measures are unlikely to be announced while all attention on is on coronavirus. With the streamers enjoying a surge in growth, it wouldn’t be a good look to enforce more stringent viewing measures while so many are suffering financial hardship and are being forced to stay indoors. 

But once the world, hopefully, is able to move on from coronavirus, expect password sharing to rise right to the top of the agenda for streamers.