One-fifth of Netflix viewers don’t pay for it

Published On July 12, 2017 | By HN Staff | Business

You may think you’re being a good friend for sharing your Netflix password, but a recent poll suggests that media companies are losing significant revenue. (Source: Flickr/Alison Watkins)

By: Alanna Fairey

Zack Stern, a 24-year-old media specialist based in Toronto, watches Netflix but does not have his own subscription. He says that avoiding the subscription is a way to save money.

“It was a much more affordable solution for everyone who uses the same account,” Stern said. “Instead of being charged each for individual accounts, we all use one.”

He’s not doing anything wrong under Netflix rules, his family is footing the bill and more than one person can share the subscription. But others might be bending the rules by sharing their passwords, giving them access to the video streaming service.

And it may be affecting the company’s bottom line. Netflix is expected to show a drop in subscription revenues when its quarterly report is released next week, according to at least one financial report.

Netflix’s revenue growth is expected to drop to 19 per cent in next year’s second quarter from 31 per cent for the same period this year, according to Thomson Reuters.

Stern isn’t the only one password sharing, but it is not prohibited under the current Netflix Terms of Use.

The terms recommend that people keep their password a secret, but subscribers can sign in on multiple devices.

“To maintain control over the account and to prevent anyone from accessing the account (which would include information on viewing history for the account), the Account Owner should maintain control over the Netflix ready devices that are used to access the service and not reveal the password nor details of the Payment Method associated with the account to anyone.” See the full terms of use for Netflix.

Netflix, the dominant streaming service, has three different packages consumers can subscribe to. Depending on the plan, Netflix allows two to four simultaneous streams per subscription. For a higher number of streams, people have to pay more. However, people are avoiding paying for the fee by sharing passwords.

A poll of 4,453 Americans conducted by Reuters/Ipsos shows between June 8 and 26 that one-fifth of young adults borrow passwords for streaming services. The poll has a plus or minus margin of error of two per cent.

The poll showed that 21 per cent of viewers between the ages 18 to 24 had at some point accessed services such as Netflix or Hulu by using the usernames and passwords of people that they do not live with. The survey also found 12 per cent of adults do the same thing.

TV industry partners are expected to report their quarterly subscription revenues next week, with Netflix releasing their results on July 17. If there is evidence of lost revenue and significant decrease in new subscriptions, investors may pressure these TV streaming sites to change their policy.

“While in the ideal world everyone who consumes creative content like movies, television shows and music would also pay for it, the reality is somewhat more disappointing,” said Carmi Levy, a CTV technology analyst and journalist.

“The key difference with streaming sites is how easy they make it,” he said. “Once you have someone else’s username and password, you pretty much have carte blanche to watch or listen to whatever you wish.”

While Levy says it’s easy to look at the numbers as lost revenue, he also says there’s some question surrounding whether someone who makes use of a friend of family member’s Netflix credentials would have paid for the service themselves in the first place. In other words, the lost revenue may not turn into real revenue if the rules governing password sharing are tightened.

“Streaming services will likely stem their losses, but they’ll never completely eliminate them,” Levy said. “It’s up to them to decide on appropriate levels of loss and control, because more aggressive efforts to rein in this form of piracy will come with their own unique costs.”

If streaming sites became stricter about password sharing, Stern, who watches about six hours of Netflix a week, said he would consider subscribing to his own Netflix account, depending on whether the price is right.

“I jumped into password sharing for this account because of all the great content on Netflix,” Stern said. “It would depend on how much they increase their monthly rate and if they increase it. However, if they maintain their $8 monthly fee, then I’d be more inclined to get my own account than not.”

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