Once Again, Sharing Streaming Passwords Is Not 'Piracy' Or 'Freeloading'

from the we've-been-over-this-already dept

We'll apparently have to keep making this point until it sinks in.

For years now, streaming video providers like HBO and Netflix have taken a relatively-lax approach to password sharing. Netflix CEO Reed Hastings has gone so far as to say he "loves" password sharing, and sees it as little more than free advertising. Execs at HBO have similarly viewed password sharing in such a fashion, saying it doesn't hurt their business. If anything, it results in folks signing up for their own accounts after they get hooked on your product, something you'll often see with kids who leave home, or leave college and college friends behind.

In other words, the actual streaming providers consistently say they see password sharing as a form of marketing. And most of these services have built in limits on the number of simultaneous streams per account that can operate at any one time, deflating much of the utility for heavy users looking to piggyback on others' accounts. That caps the phenomenon from operating at any scale that could prove truly harmful (say by 20 users sharing one Netflix account).

That doesn't stop folks from conflating password sharing with "piracy." You'll see older cable executives occasionally whine about this subject, not understanding how any of this works. You'll also see stories like this one pop up every so often, insisting these companies are losing "X" millions because they're not cracking down harder on password streams:

"As many as 1 in 5 people today are mooching off of someone else’s account when streaming video from Netflix, Hulu or Amazon Video, according to a new study from CordCutting.com. The report estimates Netflix could be losing $192 million in monthly revenue from piracy — more than either Amazon or Hulu, at $45 million per month and $40 million per month, respectively. Millennials, not surprisingly, account for much of the freeloading."

Is there nothing we won't blame Millennials for? Poor souls.

Of course potential lost sales are not the same as guaranteed lost sales, as you don't know these users would necessarily sign up for service if they weren't allowed to share the account. Many might just actually pirate the content instead.

Meanwhile, calling it "freeloading" (as Techcrunch does) or "mooching" (as the study authors do) is also misleading. The account owners have signed off on the sharing, it's an idea that's built into the core business model, and the streaming operators themselves have repeatedly stated they're not only fine with it, but often see it as beneficial. Again, here's what Netflix said about the practice a few years back:

"We love people sharing Netflix," CEO Reed Hastings said Wednesday at the Consumer Electronics Show here in Las Vegas. "That's a positive thing, not a negative thing."...A lot of the time, he said, household sharing leads to new customers because kids subscribe on their own as they start to earn income."

And this is what former HBO exec Richard Plepler told BuzzFeed a few years back:

"It's not that we're unmindful of it, it just has no impact on the business," HBO CEO Richard Plepler said. It is, in many ways, a "terrific marketing vehicle for the next generation of viewers," he said, noting that it could potentially lead to more subscribers in the future. "We're in the business of creating addicts," he said at a BuzzFeed Brews event in New York.

So if it's sanctioned and a form of free marketing, calling it "piracy" is arguably silly. Could you possibly make more money by being a hard ass about the practice? Maybe. But you'd cancel out the net benefit of ingratiating people to your brand and service. Is it possible Netflix and HBO begin cracking down on the practice now that the former is part of the MPAA and the latter is owned by legacy-minded AT&T? Probably. They likely just wanted to grow initial market share, then figured they'd clamp down on the practice later once they'd grown powerful.

But that still doesn't make password sharing "piracy" or "freeloading." And by cracking down on the practice you risk driving this accumulated base of would be customers to piracy instead, in which case you've arguably played yourself. Given that every broadcaster and its grandmother is expected to launch a streaming platform over the next few years, the market is about to be flooded with options. Being semi-casual about sharing could prove to be a competitive advantage, and being a hard ass could, again, either drive those customers you egotistically see as automatically "yours" to piracy, or to a more open-minded competitor.

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Filed Under: losses, password sharing, piracy, streaming

Companies: hbo, netflix