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Password Sharing: Netflix, HBO Missing $500 Million in Revenue?

Password Sharing Netflix HBO Missing 500 Million in Revenue Variety


Netflix, HBO and other Internet video-subscription providers are theoretically leaving megabucks on the table from customers nefariously sharing login info with nonpaying users. So why aren’t they aggressively trying to block the millions of freeloaders gorging on “Game of Thrones” or “Orange Is the New Black”?

Illicit password-sharing would appear to be a serious issue for subscription VOD players: The practice will cost the sector upwards of $500 million worldwide in 2015, according to a recent report from research firm Parks Associates.

It’s certainly a striking claim. About 6% of U.S. broadband households use an over-the-top video service paid by someone living outside of the household, the firm estimated. Unauthorized password-sharing is most rampant among consumers 18-24, with 20% of OTT users in that age bracket binge-watching on someone else’s dime, Parks says. The data is based on a consumer survey of 10,000 U.S. broadband households conducted in Q3 2014.

But the reason subscription-video services are not moving to actively stamp out password sharing, at least for the time being, is that they don’t want to screw up the customer experience — especially as they’re in growth mode, adding new subscribers every month.

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Yeah, Netflix and HBO are smart not to mess with this while they're growing.

It's good marketing for Netflix and HBO and their shows. 

the attention is key

Yes. The more attention they get, the more likely someone will eventually pay. 

This is right on. 

It really is better for media companies to just let some people share login creds and even pirate their content. Attempting to protect profits by cracking down on users who aren't paying is misguided -- it does indeed hurt user experience and interfere with growth just as the article claims, and also creates bad press for the company. It also doesn't work. You can't stop the pirates, all you can do is screw with your legit paying users.

Both Netflix and HBO have enlightened attitudes about DRM, and it's been to their advantage. And as these users in the 18-24 bracket grow up and get jobs, many of them will start paying for their own accounts.

I've really been quite impressed with both of these companies, and am glad to see them producing original content and distributing it independently of the big cable providers. In the same way that many people have given up landlines since cell phones are so ubiquitous, we're also going to see young people eschewing overpriced / bundled cable offerings in favor of these cheaper (and overall better) options from Netflix and HBO.

Both the traditional music industry and the big cable companies could learn a lot from these guys, though we all know that they won't. It will be interesting to see how old media companies fare over the next decade.

You are right on, too. 

HBO and Netflix seem to be learning from each other about this. 

But I don't think the cable companies can learn from this because they have a different business model. They're not in the business of producing original content.

I do agree that music companies can learn from this. With Apple Music, Pandora, and Spotify they appear to be headed in the direction of getting consumers to pay for service not content too. 

If the accounts are very personalized, then people will not share them, because they will not want others to mess up how they have things set up.

Is it common for people to share iTunes accounts?

It didn't used to be common for iTunes sharing but now Apple has built family sharing to allow that to happen more easily. 

The claim that these companies are missing out on $500 million in peripheral customer revenue is really a bullshit assumption – most of the people that take advantage of sharing someone else's paid login do it because they're either too cheap, too lazy or simply have accurately assessed that the service as priced is unaffordable to their means.  Blocking login sharing is not going to generate a rush for the majority of free-riders to suddenly start paying these companies for services... they're free-riders for reasons that have nothing to do with the services they're riding for free.

If they estimate 6% of users are free-riders, then an as realistic assumption could be that only a mere 2% of those entire 6% would pony up the cash and convert into full paying users if challenged to do so.  

And that's not worth pissing off paying customers to police...

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