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As many as 1 in 5people are using a password from another account in order to access SVOD services, according to a study from CordCutting.com, per TechCrunch.
Password sharing is estimated to result in billions of dollars in missed revenue for both SVOD and pay-TV over time, and the problem is getting worse. For its part, the US cable industry is expected to see password sharing losses rise to $9.9 billion by 2021, up from $3.5 billion in 2017, per Parks Associates.
Password sharing behavior is most prevalent on Netflix, but it also impacts Amazon Prime Video and Hulu:
- Netflix: An estimated 24 million pirates result in losses of $2.3 billion a year for Netflix, and those who pirate Netflix tend to do so for 26 months, on average.
- Prime Video: 5 million estimated pirates result in losses of $540 million a year, and those who pirate Prime Video tend to do so for 16 months.
- Hulu: 5 million estimated pirates result in losses of $480 million a year, and those who pirate Hulu tend to do so for 11 months.
Despite the harm caused by password sharing, some SVODs may choose not to crack down, viewing the behavior as a marketing device that drives customer acquisition and loyalty. For SVODs, growing the subcriber base is the top priority. For all its ills, password sharing behavior can help to expand a service's reach, creating a larger pool of potential sign-ups. Imagine a password sharer who pirates Netflix for an estimated 26 months: That user has likely developed a habit of using the service, and is foreseeably more likely to subscribe if their access is eventually cut off, for instance.
HBO CEO Richard Plepler has previously argued as much about HBO Now, claiming that password sharing is a “terrific marketing vehicle for the next generation of viewers…we’re in the business of creating addicts.” And Netflix CEO Reed Hastings has said similar: "We love people sharing Netflix. That's a positive thing, not a negative thing." In particular, new-to-market services that need to quickly scale their sub bases might choose to let password sharing behavior ride, in a bid to expose more potential customers to a new product.
If they act, dominant services could recoup revenue from password sharers, as a sizeable portion say they would pay if services clamped down. If password sharing was more restricted, some people admitted they would pony up for their own access. Three-fifths (59%) of Netflix password sharers (around 14 million subscribers) said they would pay for Netflix if they lost access, per CordCutting.com.
Further, about 38% of account moochers (2 million subs) said they’d be willing to pay for Hulu, and 28% (1 million subs) for Prime Video. Greater crackdowns on password sharing will likely work best for high-customer satisfaction services, like Netflix, which can more likely afford to restrict access because of how dominant they already are in consumer households.
If they act, Netflix or others could explore the AI opportunity to help detect and block password sharing, for instance. For now, it's still unclear whether they consider the potential value of recouping lost revenue to be greater than the potential value of converting password sharers over time.
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