*Online streaming services are struggling with an increasingly expensive problem. According to CNBC, online users of streaming services such as Netflix, Hulu, and Amazon are increasingly sharing their account passwords to skirt the costs of using streaming systems. Users under 40 are especially likely to mooch off their friends, siblings, or parents’ passwords.
All those unauthorized users can put a strain on even the strongest digital networks. Google expects websites to load in under four seconds on desktops and just one second on mobile devices. Likewise, the average users will bounce off a page that takes more than one, two, three-Mississippi to load. And as Netflix takes up an incredible percentage of the data flowing across public networks, large Internet service providers are threatening to “throttle” the service’s streaming capabilities.
As a result, password sharing could have very real consequences for audio and video streaming services.
Unfortunately for Netflix, the number of potential customers willing to pay for streaming services has been on the decline. In large part, that’s because users are able to easily access the content they want through the accounts of their friends and family members.
“The cat is out of the bag,” said Jill Rosengard Hill, the executive president of Magid. “I wish I had a solution because it’s really hurting the business model and monetization of these premium high-value services.”
Approximately 13% of Baby Boomers, 19% of Generation X, and 35% of Millennials share passwords for streaming services. By sharing passwords, online users are reportedly costing streaming services hundreds of millions of dollars in revenue loss. Of course, what the Netflix & Chill generation calls “sharing,” big tech companies consider stealing.
Media experts say it’s difficult to pinpoint the exact cost of password-sharing. The average person spends about $1,100 per year on coffee, and the average employee costs their company up to $1,300 in printing expenses annually. Yet many people balk at paying $19.99 per month for a streaming service they use for hours every night.
One recent report claims that Hulu has lost up to $1.5 billion a year due to password-sharing.
However, is the problem really so bad? In 2014, HBO CEO Richard Pleper also said that password sharing wasn’t something the company was worried about.
“It’s not that we’re ignoring it, and we’re looking at different ways to affect password sharing,” said Pleper. “I’m simply telling you: It’s not a fundamental problem.”
Unfortunately, it seems that password sharing may have become a growing problem in recent years. Many young users are using the account information of more than just their friends and family. In an interview with CNBC, two separate streaming users were using the account information of exes they hadn’t seen in years.
“Millennials, in particular, want ease of access and ease of use on their dime at their convenience,” said Hill.
Ease of access may not be the only reason for password sharing. Although streaming services may only cost some $10 to $20 a month on average, that price can add up when paired with the cost of Internet, or both.
Those under the age of 21 have an even bigger password-sharing problem. Approximately 42% of Generation Z report sharing passwords with friends.
“We do believe that access to content creates a perceived value of that content and will lead to a higher willingness to pay,” said Hill. “[But] if the content is something they value, they’re going to find a way to access it.”
To combat password-sharing, many streaming services have attempted to make their services more attractive to young consumers. Approximately 40% of users will abandon a web page that takes longer than three seconds to load, and so some services have focused on increasing their streaming speed. Others have focused on social media marketing, which has the benefits of increasing exposure and traffic.
Yet, Daniel McCarthy, a marketing professor at Emory University, says one of the biggest problems with password-sharing is that companies are unwilling to police inappropriate sharing.
“As we move away from an advertising-only revenue model towards people paying for subscriptions more, it has to carry with it the rise of sharing,” said McCarthy. “Companies like Hulu, they are under pressure right now because they are losing a lot of money [from general operations].”
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