Password Wars

Streaming services have become an integral part of our daily lives. The convenience of accessing a vast library of content at our fingertips has revolutionized how we consume movies, TV shows, and more. However, a new wave of change is sweeping through the streaming industry as platforms crack down on the widespread practice of password sharing. The financial impact to these streaming services has been substantial, as they have lost potential revenue from users who would otherwise be paying for individual subscriptions.

Last year, Netflix cracked down on password sharing by requiring "freeloading viewers" to open their own account or allowing a subscriber to pay an $8 monthly fee to allow people living in different households to watch Netflix. The company has since seen an increase in new subscribers, including 13.1 million new subscribers in the fourth quarter last year. And that is in addition to the 8.76 million new paid memberships that Netflix reported in the third quarter. Also this week, Netflix reported fourth-quarter net income of $937.8 million, or $2.11 per share, versus $55.3 million, or 12 cents per share, in the prior-year period.

With these impressive numbers, other streaming platforms are looking to update their policies and tiers in hopes of being as profitable as Netflix. One example is Disney+. In August 2023, Disney CEO Bob Iger announced plans to increase the fees on their streaming services (Disney+, Hulu, and ESPN+) in October 2023. Then, in November 2023, Disney+ updated their Canadian Subscriber Agreement to say that users could not share a subscription outside their household unless permitted by their account tier. As of this week, it appears that this policy has made it way to the United States.

Disney has updated the language on its three streaming platforms to limit password sharing outside of a user's individual account. In an email to subscribers sent Wednesday, Disney-owned Hulu said it would begin limiting account sharing for prior and existing subscribers starting March 14, with the changes effective for new subscribers as of last week. Disney+ and ESPN+ have also both updated their user agreements to reflect the changes to account sharing, though it was not clear when those changes occurred. Iger said, "We certainly have established this as a real priority. We actually think that there's an opportunity here to help us grow our business." His goal is to have Disney's streaming services be profitable by the end of 2024.

To Mr. Iger's point, streaming services argue that cracking down on password sharing is essential for maintaining a sustainable business model. The costs associated with producing high-quality content continue to rise, and these services rely on the subscription fees to fund their original productions. By preventing unauthorized access, streaming platforms can continue to invest in creating engaging content for their subscribers. Yet while streaming services justify their actions, some users have expressed dissatisfaction with the crackdown on password sharing. Critics argue that sharing passwords is often a way to introduce friends and family to new content, potentially leading to more subscribers in the long run.

Some streaming platforms have made sharing more difficult from the onset - such as Amazon linking a Prime Video account to one person's credit card or Apple TV+ requiring an Apple ID during login. What streaming service may be next to jump on this trend? In November 2023, (HBO) Max CEO Casey Bloys said that a potential password-sharing crackdown is "definitely on the to-do list of things to look at."

In the future, the streaming industry will likely see a blend of innovative security solutions and user-friendly measures to strike a balance between protecting revenue streams and providing a positive user experience.