A coalition that includes Netflix Inc., HBO and cable-industry titans is stepping up efforts to crack down on password sharing, discussing new measures to close a loophole that could cost companies billions of dollars in lost revenue each year.
Programmers and cable-TV distributors are considering an array of tactics to cut off people who borrow credentials from friends and relatives to access programming without paying for it. Possible measures include requiring customers to change their passwords periodically or texting to subscribers' phones that they will need to enter to keep watch, according to people familiar with the matter.
Some TV executives want to create rules governing which devices can be used to access a cable-TV subscription outside the home. While someone logging in from a phone or tablet would be fine, someone using a Roku device at another location could be considered a likely freeloader, one person said.
If none of those tactics work, pay-TV subscribers could someday be required to sign into their accounts using their thumbprints.
"I feel like I'm beating my head against the wall," Tom Rutledge, chief executive officer of Charter Communications Inc., said during an earnings call last month. "It's just too easy to get the product without paying for it."
But taking more aggressive measures poses risks. The people using free services – especially younger consumers – may never agree to sign up for a subscription, no matter how many hassles they endure. That means companies would mostly just be alienating paying customers who could get frustrated and stop using an app or cancel their service. In other words, a lot of downside and possibly a little upside.
"If you ask any cohort of young people if they will ever pay for Netflix or video services, the answer is inevitably no," said Mike McCormack, an analyst at Guggenheim Securities.
The pay-TV industry is projected to lose $ 6.6 billion in revenue from password sharing and piracy this year, according to Parks Associates. By 2024, that number could grow to $ 9 billion, the research firm said.
Two years ago, some of the biggest names in entertainment and technology formed a group called the Alliance for Creativity and Entertainment, which was devoted to reducing online piracy. Last month, the group announced that it was turning its attention to password sharing. Participants include Netflix, Amazon.com Inc., Walt Disney Co., Viacom Inc., AT&T Inc.'s HBO, Comcast Corp. and Charter.
No consensus on where to draw the line.
Consumers can access streaming programming through apps from both distributors like Charter and programmers like Fox. As a result, both sides of the industry need to work together to solve the problem. Charter, which sells cable-TV service under the Spectrum brand, has said its recent distribution deals with Fox and Disney will help them address password sharing, but did not specify which measures they should take.
While industry executives widely agree password sharing is a problem, there is no consensus on where to draw the line. Programmers and distributors blame each other for being too convenient in how many people can simultaneously stream from one account. DirecTV and Comcast allow five streams. Fox and ESPN generally allow three.
Online TV services also vary in how generic they are about password sharing. Apple TV +, which launched Nov. 1, allows up to six people to stream from one family plan. Two upcoming services – AT&T's HBO Max and NBCUniversal's Peacock – aren't ready to announce how many streams to allow, according to representatives for both companies. A spokeswoman for Disney +, which launches Nov. 12, responding to a request for comment.
Netflix allows only one stream for its basic plan and four streams for its most expensive service. Three years ago, CEO Reed Hastings said password sharing is "something you have to learn to live with because you have so much legitimate password sharing – like sharing with your spouse, with your kids."
Recently, there have been indications that the company may be reconsidering its tolerance. On an earnings call last month, Netflix Chief Product Officer Greg Peters said it was "looking at the situation" and seeking "consumer-friendly ways to push on the edges of that."