How much is the TV industry losing to credential sharing? Estimates from Cartesian, based on a survey of nearly 1,200 American consumers in November, reveals that 27% of consumers access streaming video content using account credentials borrowed or stolen from someone they do not live with.
Among millennials and post millennials the problem is worse, with 35% percent sharing passwords for OTT streaming services, compared to 19% of Generation X subscribers and only 13% of Baby Boomers. While the Boomers share Amazon Prime Video the most, millennials are focused on Netflix and Hulu.
The biggest threat is on the way – since ‘the kids don’t want to pay.’ This refers to the ‘post-millennials’ or Gen Z, who are 21 and under and are sharing passwords at a whopping rate of 42%. Many may see streaming password sharing as a variation of staying on the family mobile phone plan into early adulthood, or claiming a parent's health insurance well into their twenties, but problem is that the streaming model is different. While mobile providers charge extra per family member, and health insurers can verify a child's age and cut off access, OTT streaming services, at least until now, typically did not have a way to know how many people were freeloading off their services.
Revenue losses for OTT Streaming Services
How much are Netflix, Hulu and Amazon Prime losing to password sharing each year? According to a study by 'Cordcutting' it’s at least $2.3 billion in revenue lost each year in the US for Netflix. The others don’t come close - Amazon Prime Video is estimated to be losing at least $540 million while Hulu comes in at just $480 million. However, these estimates are usually based on the assumption that all sharers would pay if they could no longer share. But will all of those who are sharing convert to paid subscribers? While about 60% of Netflix subscribers would pay if caught, less than 40% said they would subscribe to Hulu, and only 27.6% would buy Amazon Prime.
Direct revenue losses, while headline grabbing, are not the only consideration. Additional risks to TV service providers include:
- Higher content costs as a direct result of revenue losses
- Increased operating costs due to supporting the infrastructure, both real and virtual, to accommodate the increased levels of streaming
- Breaking content licensing agreements
- Security breaches: in the new era of GDPR legislation and data sensitivity service providers can end up paying large penalties if their security measures are not up to scratch
One simple way to reduce credential sharing would be to require additional verification for logins at unusual locations, or for usage separated by large distances. However, the savvier sharers might be able to find a way to get around those restrictions and protocols such as two-factor authentication also present a barrier to new users. It’s a small one, but with consumer sensitivities set on a hair-trigger with streaming services and churn levels high, any barrier can be an unwelcome one.
Some of this sharing may soon be coming to an end, if the hype at CES 2019 is to be believed. Companies such as Synamedia are pioneering new services that use machine learning to spot shared passwords. By examining the content that is watched, analyzing on which device it is watched and from where, the service looks for consumption patterns that indicate a shared password. The software then gives the service provider a probability score of how likely it is that the account holder is ‘giving generously.’
Patterns in usage of OTT Streaming Services
Certain patterns indicate password sharing, but it’s important to differentiate between similar scenarios to know which are legitimate and which are not. As an everyday example, if an unusual number of devices are detected in a household, it could be simply because a user has changed devices. But if content that has been authenticated for consumption in one household is being consumed by devices at multiple IP addresses, it could well be due to password sharing. As usage patterns are dynamic, machine learning is critical since it can adapt to these shifts and continue to discern between legitimate use cases and infringements.
There are definite levels of infringement at work too. If a probability score indicates that it’s likely that the credentials have been sold online to multiple users, the service provider has the option of shutting down the accounts. However, if it’s a lower score, indicating that it’s probably just a family that is just too cozy with their credentials, the service provider use this as an opportunity to upsell a premium package to the family.
In fact, many suspect that companies such as Netflix and HBO have purposely not cracked down harshly on credential sharing as yet. The theory is that when these services were starting out, they may have been inclined not to care too much about password sharing since it was an effective way of bringing in new users to the service. But as these companies grow and become more concerned about piracy as they move into a more mature phase, they tend to want to make certain that they’re maximizing their revenue.
Netflix is especially well-known for analyzing its data to provide a personalized experience; therefore it’s more than likely that it is capable of tasking its developers to discover the consumption patterns of credential sharing to be able to crack down on the infringers. It has the power, it simply chooses not to use it.
Why would it do this? HBO currently carries limited advertising and sometime in the future, Netflix might decide to implement advertising as well in one way, shape or form. If it does, then there’s actually a benefit to password sharing by having more eyeballs on ads, even when those eyeballs have not paid for the streaming service. There is also a difficult to quantify, but undeniable ‘buzz’ that the illicit sharers contribute to about Netflix programming.
However, with competition in the OTT space only intensifying and huge budgets being spent annually on content, one way or the other the era of the freeloader may soon be coming to an end.
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