Netflix Starts To Harden Its Stance On Password Sharing

from the bigger-and-dumber dept

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.

But some recent shifts in the sector suggest that may soon be changing. HBO was bought by AT&T, which tends to have a more…monopolist-esque mindset when it comes to making consumers happy. And as Netflix has grown larger and more powerful, many of its more consumer friendly positions (like oh, supporting a healthy open internet) have fallen by the wayside. And there’s a growing coalition–spearheaded by Charter CEO Tom Rutledge–that is intent on portraying a fairly limited password sharing problem as “insane” and “piracy.”

Rutledge, whose “get off my lawn” rants on this subject have been going on for years, has spearheaded the rise of the “Alliance for Creativity and Entertainment,” an organization Charter, AT&T, and Netflix all belong to. As that coalition has made cracking down on password sharing a core priority, Netflix executive rhetoric on this subject has started to shift, with Co-Founder and former CEO Marc Randolph dropping some strong hints to Yahoo that a password sharing crackdown may be coming:

“Streaming giants and cable companies, led by Netflix (NFLX) and HBO (T), are reportedly considering ways to crack down on password sharing among streaming users. “You’re not scared, are you?” Netflix Co-Founder & First Netflix CEO Marc Randolph told Yahoo Finance’s YFi PM, later adding: “You know there’s abuse and that’s not fair.”

While a lot has been made of said “abuse,” it’s important to remember that streaming providers already impose limits as to how many hardware devices can stream from one account at any one time. And while folks like Rutledge like to proclaim that password sharing constitutes the loss of millions in revenue, like in piracy debates there’s no guarantee that users will automatically sign up for subscriptions should companies start being hard asses on the subject. Not being hard asses like this is the exact reason people, for now, like streaming providers so much more than their counterparts in the traditional TV sector.

That said, Randolph makes it clear he understands the name of the streaming game right now is getting customers to sign up, and any hard-nosed crackdowns–especially if they impose new barriers to access–only annoy users and make that more difficult. As a result, we’re apparently only at the “whine more about it to the media” part of the program:

“I don’t think we’re talking about people coming into your apartment and putting you up against the wall and saying: ‘Show us your credentials,’” Randolph said. Randolph explained that from Netflix’s inception, it was meant to be flexible and easily accessible. “There’s abuse and that’s not fair,” he said. “But the whole time you want to make it easy for people to be flexible.”

Right now, competition ensures that companies will likely remain flexible on this subject. The name of the game is gobbling up as many new subscribers as possible. But as the also-ran services are shaken off and a few companies come to dominate the space, you can be sure that a tougher crackdown on password sharing is waiting in the wings. Even if it’s nowhere near the terrifying menace companies are portraying it to be.

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Companies: netflix

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Comments on “Netflix Starts To Harden Its Stance On Password Sharing”

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20 Comments
Anonymoussays:

I pay for 4 streams, why do they care who watches them? This is not password sharing, if I exceed the number of streams then don’t stream a fifth stream, why is that so hard?

Some might say, well you can schedule different people to watch at different time. Again, who cares, I pay for 4 streams 24/7, I guess I’m bad for actually using the service.

Dirk Belligerentsays:

Re: Re:

None of these pieces discussing the scourge of password sharing define how many users is too many users? Are they talking about 10 or 20 college students in a dorm using a single HBO NOW login or a couple people patching together a quilt of services between themselves?

My in-laws mooch off my Prime, Netflix (I had to bump from 2 to 4 concurrent streams package when I went to watch something at home to find they’d hogged up the 2 streams there; also need it for 4K now, too), and Hulu subscriptions and I mooch their HBO GO, Showtime Anytime, and Starz access via their satellite package.

Due to the mobile nature of these services, they can’t practically track IP addresses or devices to determine usage since people could be on their phones or web browsers at work and so on. You can’t even go per-device because I have apps on all my consoles and streamers and will fire up Netflix after gaming on my XBOX or may have been watching my Apple TV.

I think its more likely the frat house scenario, but again, there is a lack of definition of terms.

Anonymoussays:

Re: Re: Re: Re: Re: Re:

That’s nuts. I pay for my grandparents 4-stream subscription, who live in a nursing home. My grandparents also have a cabin in northern Minnesota where my aunt and uncle live. I plugged the credentials into their Roku as well.

Do I have to deliver an affidavit to Netflix affirming that my grandparents do technically own both properties? Does it matter that it’s my grandparents children, living “at home”, or because they’re adults and my grandparents don’t go to that property anymore, that it should be separate?

James Burkhardtsays:

I think its important to note what is happening in the industry as a whole – Netflix is losing the biggest sources of Major studio titles it had left. I was struck by how seemingly 2 years into the Netflix exclusivity contract Disney announced it would stop using netflix and make its own service, a service which currently has a number of titles unavailible because the netflix contract still applies to recent releases. It has left netflix beholden to exclusives, but those probably aren’t holding subscribers at the level they used to with the shallower content pool.

Netflix is clearly entering the "we are losing subscribers" realm, having missed new subscriber estimates my several million in Q2 2019. This isn’t the first time they cracked down on "password sharing", they implemented clear simultaneous stream limits in 2012, with customers paying more for more simultaneous streams. This served to stop some password sharing as paying for your friend to freeload is a much different prospect. But any attempt to try to enforce some sort of ‘household’ verification risks losing subscribers (or accelerating subscriber loss), an issue Netflix itself was expressing in 2015 when it talked about why it didn’t care about subscriber losses.

Netflix’s downfall is in the end the juggernaut that is Disney. Netflix boomed after Disney made Netflix the streaming destination for marvel films, and the Marvel Netflix originals were generally well received. I in fact have cited the coup of Netflix getting Disney as a reason it would survive the market fragmentation. But Netflix’s shotgun approach to original content, combined with high profile cancellations of show with fan and critical acclaim that make Fox’s primetime failures seem quaint, have not served to hook the consumer on Netflix as a studio, and Disney almost immediately decided it would make more money on its own. The crackdown is a symptom of market fragmentation, and a symptom of Disney’s dominance.

Anonymoussays:

Re: Re:

I agree with all of your reasons for Netflix’s slowdown. I’ve been a Netflix customer almost since the beginning of Netflix and now I’m thinking about cancelling due to a lack of interesting new content offered on the service. I watch maybe 1 show a month on that service now and it’s just not worth the subscription.

But… I don’t think Disney is going to be as successful on their own as you imply. For the same reason Netflix isn’t a very attractive option Disney will also suffer. They do own some high profile titles but fans of one or another of those titles aren’t going to pay Disney month after month for occasionally interesting content. A Star Wars fan isn’t all that likely to be interested in the next Frozen release. There may be some overlap with Marvel but, unless they really crank up the machine, those won’t release often enough to keep many subscribers.

Even HBO’s Now was only interesting to many thanks to Game of Thrones and I know I wasn’t alone in waiting for the end of the season to use a free trial to binge-watch the series. I watched all of GoT totally legally, more than once, for a total of $0. That can’t be cost-effective for HBO.

So I’m completely unsurprised that even Netflix wants to try to wring out a few more subscriptions from those sharing their parents’ or friends’ passwords. The market is fractured more than ever and nobody has much that people are willing to pay a monthly subscription for.

It is the beginning of the next phase of this market fragmentation: Culling the herd.

James Burkhardtsays:

Re: Re: Re: Re:

But… I don’t think Disney is going to be as successful on their own as you imply. For the same reason Netflix isn’t a very attractive option Disney will also suffer. They do own some high profile titles but fans of one or another of those titles aren’t going to pay Disney month after month for occasionally interesting content. A Star Wars fan isn’t all that likely to be interested in the next Frozen release. There may be some overlap with Marvel but, unless they really crank up the machine, those won’t release often enough to keep many subscribers.

The model is different. Disney+ seems to be effectively a curated selection of content focusing on big names and family friendly content. If you are just a Star wars fan, sure you won’t want disney+. on the other hand, if you are a parent? you’ll want it. Its almost a one stop shop for family content. And every few years, a whole new crop of kids comes around. This means that Disney+ can be viewed more like a refinement of the principles behind the disney animation vault of old. Focus on having Disney+ be something you get when you are a parent, and by the time you no longer need it, the next parent takes your place.

It was cost effective for HBO. like any free trial, some percentage of viewers did not retain a subscription. But that trial, and Game of Thrones, brought in enough viewers who then either continued to pay and/or found other content they also wanted to watch. That’s why HBO boomed financially, and yes after GoT ended they lost subscribers. But HBO was super profitable during the GoT period, and seem to have retained some subscribers post GoT, so questions of cost effectiveness are misplaced. Id say the y positioned themselves well for the streaming transition, but the new CEO seems to be taking the scattershot content approach that failed netflix instead of the quality content I feel justifies the subscription, so their fall will come from the new management, not the failure to capitalize every dollar during the GoT years.

Anonymoussays:

Re: Re: Re:2 Re: Re: Re: Re:

Prior to so many of the major studios choosing not to renew their contracts with Netflix there was plenty of content, more than I could watch. Now, all Netflix offers is Netflix original content and old or B/C-grade content from other studios.

We currently subscribe to Netflix, Hulu+ and Prime. Hulu+ gets the vast majority of this household’s viewing time with only occasional viewing of something worth watching popping up on the other two. Prime has other uses so we’ll likely keep that one. But Netflix has gone straight downhill since this market fragmentation started and we’ll probably cancel after what, a decade of being a customer? We won’t replace it with any other vertical streaming service either.

And that’s really the problem I’m trying (badly) to convey. The streaming providers have gone from a couple providers with lots of content horizontally across the major studios to a plethora of narrowly vertical channels, each one of which wants more $/month than Netflix ever did. It’s not that we can’t afford to subscribe to a bunch of them but rather that we don’t want to. And there is a huge population who simply can’t afford to subscribe to more than one or two.

Customers will wind up divided across all of the available services and most will fold due to insufficient revenue. Finally, then, the surviving services can contract with those studios to once again carry their content and the services will broaden horizontally again making them worth subscribing to. There’s a light at the end of this tunnel but the journey is not terribly entertaining.

nerdragesays:

Re: Re: Re:3 Re: Re: Re: Re: Re:

"…the surviving services can contract with those studios…"

The studios will be owned by one of the surviving services. Disney owns Disney and Fox, AT&T owns Time Warner, Paramount will be owned by whoever buys Viacom-CBS, Universal will be owned by whoever buys Comcast entertainment assets. Sony and Columbia will be owned by whoever buys Sony entertainment assets.

The end result will be four or so behemoth services that produce theatrical movies and then put them on their own services after some sort of window; and a lot of content make directly for streaming. Cable and broadcast will continue to collapse and not be a source of much worth watching.

Anonymoussays:

Any chance that Netflix is being pressured by outsiders? This happened with the Sony leak, which revealed that the studio was attempting to coerce Netflix into blocking VPN users… such as Canadians who find half of the content which was on Netflix US is missing from Netflix Canada, usually because a fairly nasty broadcast duopoly north of the border (Bell, Rogers) had paid the studio to keep content off the competing provider. Netflix caved like a cheap suit on that issue, so no surprise to see it again?

Anonymoussays:

Hulu should wind up winning the streaming wars because they have lots of primetime shows (including news), commercial-free for a few extra bucks, an expanding movie library, lots of classic shows, and I can keep track of what I’ve watched, with new episodes clearly marked. It’s by far the best service for content.

I’ve had Netflix free trials several times and have never paid for the service, though I’ve seen at least a dozen or more of their shows almost in their entirety (though a little late). My broadband is cheaper bundled with basic cable than by itself so that’s how they’re keeping cable customers (probably to reduce bandwidth at this point).

Agammamonsays:

?I don?t think we?re talking about people coming into your apartment and putting you up against the wall . . .

Yet.

Its not like Apple (among others) doesn’t enlist the services of state violence to stamp down on ‘unauthorized’ repair. Disney will put you up against a wall if you so much as give an unauthorized glance at Mickey. Give them time, you don’t become General Secretary and go to signing death warrants in one night.

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