Password sharing, a saving grace for the consumer but a bane for streaming services, has been thrust into the limelight as a contentious issue for streaming services following Netflix’s revelation in an April 19, 2022, letter to shareholders that it estimates almost 100 million households are accessing its services for free. While the issue around password sharing has not been strongly addressed by the streaming industry before, one can expect to hear about it a lot more frequently moving forward.

To put this matter into perspective, Netflix has around 222 million paying customers, meaning that the company would benefit by an almost 50% increase in revenue (if we assume like-for-like membership plan uptake) if the 100 million non-paying households paid for Netflix’s services. If Netflix’s annual revenue were to increase by 50%, the company would gain an additional $14.8 billion.

What are streaming platforms doing to stop password sharing?

During its Q1 2022 earnings call, AT&T also acknowledged the issue of password sharing. CEO John Stankey said AT&T had been actively monitoring HBO Max usage for activities relating to password sharing, claiming that the company had technical features and capabilities to limit the practice. Although a strong claim, Stankey did not delve into what these features and capabilities are. HBO Max, formerly part of AT&T’s WarnerMedia unit, is now part of the new Warner. Bros Discovery following AT&T’s spinoff of WarnerMedia earlier in April.

While Netflix hadn’t previously raised the issue of password sharing as strongly as it did during its latest earnings report, the company began trialing a way to monetize password sharing in Chile, Costa Rica, and Peru during March 2021 by offering two sharing options. Customers on Standard and Premium plans can add a sub account for two additional people outside of their household for approximately $2.90 in Chile, $2.99 in Costa Rica, and $2.12 in Peru. The other option allows members on Basic, Standard, and Premium plans to transfer profiles from their existing account to a new account or sub account, thus giving customers the tools to monetize password sharing for Netflix.

Fear of backlash

While stopping rampant password sharing is definitely in the best interest of streaming platforms, a cautious approach is crucial. Both AT&T and Netflix acknowledge this. If the approach from streaming platforms is too aggressive – such as raising the price of their services to offset losses accrued by users accessing their services for free or by reducing the number of profiles that can be created, which would adversely affect larger households – they could face severe backlash from users and end up in a worse situation than they’re currently in.

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By GlobalData