My mom uses my Netflix (NASDAQ:NFLX) account.
Netflix is not alone in unofficially allowing this type of sharing. Time Warner's (NYSE:TWX) HBO Now, for example, allows three simultaneous users on its $14.99 monthly subscription plan. And, it's not like the companies don't know people are sharing, as Emmy Awards host Andy Samberg demonstrated at the recent awards telecast when he, with HBO's knowledge, gave out "his" email and password for the service.
The credentials Samberg gave were real and the action -- because it had HBO's blessing -- suggests that at least Time Warner is not overly concerned with account sharing. Netflix does not exactly agree, but it's not making an effort to stop it, either.
"If you mean, 'Hey I got my password from my boyfriend's uncle,' then that's not what we would consider appropriate." CEO Reed Hastings said in April 2013 in response to a question about inappropriate account sharing.
That's a little bit of guidance, but it's not definitive, and it actually suggests that the company doesn't care that I share my password with my mother (who does not live in my house).
Time Warner's HBO boss Richard Plepler was even more outspoken in on password sharing not being a big problem (yet).
"We look at it very carefully," Plepler said in an interview with CNNMoney, but "right now password sharing is just simply not a big number."
If it becomes a bigger number, Plepler told the news site he would consider doing something, but it does not appear to be an issue with the Time Warner brand now.
How big of a problem is it?
Two different studies suggest password sharing for streaming sites is occurring in significant numbers:
- A USA TODAY survey of 1,000 people found that 36% percent share their streaming media login credentials with others.
- Parks Associates found that 20% of streaming video users ages 18 to 24, and 10% of those ages 25 to 34, used video credentials paid for by someone outside the home.
There are other reports that put the number even higher, but however you look at it, it's very clear that people are sharing accounts in ways that don't meet the intentions of the providers for multi-screen accounts.
How much is this costing?
A report from Parks Associates, The Cost of Piracy, suggests that credential-sharing will cost the video-streaming service industry $500 million in direct revenue globally in 2015. Parks Analyst Glenn Hower offered the following commentary:
Credential sharing has a measurable impact on video services, particularly in the OTT [over-the-top] video service area, where young subscribers are active. The impact on OTT video revenues is especially troublesome as OTT providers are investing large sums of money to boost their original content offerings.
The Cost of Piracy found that 20% of OTT users aged 18-24 use an OTT video service paid by someone outside the home -- the highest of any age group. Only 10% of OTT subscribers ages 25-34 admit to this behavior.
It's a mixed blessing
Time Warner's HBO and Netflix are both guilty of making it very easy for people to take advantage and share passwords. In some ways, that makes sense because for younger people, borrowing an account may be a path toward subscribing down the line. Think of account sharing as a sort of extended test trial that will lead to increased subscriptions as users get older and improve their economic situations.
That's likely why neither company has used technology to stop account sharing, and why it's not expressly forbidden even in a difficult-to-enforce written policy. Netflix and HBO may not exactly want people to share, but they aren't really against it, either. That may change going forward, especially if new subscriber growth slows, but for now, it's clear that the two streaming media players are purposefully ignoring the issue.
Daniel Kline has no position in any stocks mentioned. His mom watches Netflix much more often than he does. The Motley Fool owns shares of and recommends Netflix. The Motley Fool recommends Time Warner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.