The percentage of consumers who say they use one or more subscription streaming service belonging to a friend or family member has declined slightly across most major platforms, a series of consumer surveys conducted by Hub Entertainment Research shows.

As this graphic reveals, the small downward trend began in the second quarter of last year, right around the time that Netflix initiated its big global crackdown of password-sharers here in the U.S. 

Venturing into seemingly dangerous terrain, Hub claims that, "Viewers who use others’ passwords are more likely to be younger, non-white and have kids."

The research company also said that password sharers tend to be TV lovers. 

"It’s a mistake to assume people who use another’s SVOD password do it because they are reluctant to pay for TV," Hub added. "When it comes to paid subscriptions, more than 4 in 10 of this segment pay for a hefty 6 or more TV services. And among MVPD and vMVPD subscribers, the password sharers are also much heavier users of premium cable channels. In fact, they are heavier users of nearly all sources of TV, both paid and free, compared to those who do not share passwords."

Netflix's global crackdown on account sharing, which hit U.S. shores around 10 months ago, appears to be bearing fruit.

According to Leichtman Research Group's Internet-Delivered TV Services 2024 report, which is based on a survey of 2,546 U.S. households, just 10% of domestic Netflix accounts are borrowed by someone living outside the account owner's household. 

That number has been dropping steadily -- compared to 15% in 2022, 14% in 2020, and 16% in 2018 -- since the streaming company refocused its efforts on eliminating the ability for multiple households to freely share one Netflix account.

With Disney and Warner Bros. Discovery also confirming plans to limit account sharing, the improvement is broad-based, LRG found. 

Overall, 10% of all DTC services are now borrowed from someone else, down from 12% in 2022. And 73% of all DTC services are fully paid for and are not shared with others outside the household. In LRG's comparable survey released in March of 2023, the firm pegged that metric at only 68%. 

LRG's new study found that of the 23% of DTC services used in more than one household, 11% of them are paid for by someone who shared them with another household, and 10% are borrowed from another household.

However, the likelihood that an individual shares the service increases among younger consumers, with 17% of all DTC services for the 18-35 age group fully paid for by somebody else, compared to just 7% for those in the 35+ demographic.

“Password sharing continues to be prevalent throughout the streaming video industry, despite recent efforts to limit it," said Bruce Leichtman, LRG president and principal analyst. “Overall, 20% of households have at least one DTC service that is paid for by another household.”

In late May, a warning bell sounded for Netflix: The research firm OnePoll, having surveyed 1,000 U.S. adults on behalf of Forbes, was picking up signals suggesting that as much as 35% of the Netflix subscriber base might cancel subscriptions in protest of price hikes and/or the streamer’s new clampdown on password-sharing. 

Here’s the backdrop: On May 23, Netflix notified customers of a new “Extra Members” policy: Account holders sharing logins for Netflix’s Standard Plan with someone outside the immediate household would need to tack on a $7.99-per-month surcharge to continue sharing. Alternatively, the user drafting on someone else’s credentials can transfer their profile to a new paid account of their choosing. Alternatively again, the subscribing member could stop allowing someone else to use their login credentials altogether. 

A separate survey from Samba TV and HarrisX came to a similar conclusion around consumer sentiment: 37% of Netflix subscribers would consider canceling in the wake of the new password policy. In both cases, the results seemed chilling: Forbes noted that the findings, if extrapolated to Netflix’s entire global user base, “could result in approximately 80 million lost subscribers.” 

But then, only days later, better news. The researcher Antenna, which examines payment data, found that Netflix was adding new accounts in droves. Antenna calculated that Netflix had its best four-day runup of subscriber additions in nearly five years, with more than 100,000 accounts inaugurated on May 26 and again on May 27. Tightening the screws on password-sharing suddenly looked to be a brilliant business maneuver. 

The obvious question, then, is: Who got it right? And who got it wrong? 

The answer to the first question is: probably both. The answer to the second is: probably neither.

The truth is that both findings can be true: Netflix can lose lots of subscriptions because of its hardened password-enforcement approach (although 80 million seems clearly to be an exaggeration). At the same time, Netflix can also add lots of subscriptions because of the very same policy. 

First the bearish case: It’s certain that some number of accounts will peel away as users bristle at the clampdown on password-sharing. This may be the sentiment researchers from OnePoll and Samba/HarrisX picked up: a generalized recoiling from the realization that parents, for example, can no longer freely share credentials with their kids who are away at college. If Sarah the sophomore can no longer log in with mom and dad’s account, goes the thinking, then we’ll cancel altogether. 

Or at least, that’s what people may be telling survey takers. As always, survey data can reflect stated intentions that don’t always materialize. Fans of the Netflix courtroom drama The Lincoln Lawyer, for example, may reconsider their cancellation vow when new episodes of the original series hit the Netflix menu next month. 

Antenna’s reliance on “millions of consumer transactions” shared by opt-in contributors offers a different viewpoint, suggesting many Netflix stowaways are going legit. One longtime Netflix user recently confessed to the online magazine The Ringer that “a decade of Netflix mooching” may be ending.

What matters in the end is what everyone who has ever managed a subscription business must contend with: the delta between gross subscriber additions and gross subscriber defections. If the total number of new accounts tied to the password-sharing clampdown — “gross adds” in industry-speak — is greater than the total number of disconnects tied to the new policy, Netflix might win big with a surge in paying customers.

The word “might” applies here because it’s not just pickups and defections resulting from the new password policy that matter. There is also underlying, normally occurring activity. In any time period, Netflix, like every subscription service provider, loses some accounts and gains others. What’s changed is that now, this normal churn within the customer base is amplified by accelerated activity tied to the password clampdown. 

Where does Netflix come out? We’ll know by mid-July, when Netflix releases second-quarter financial results. Regardless of the net tallies, the outcome will hinge on these ingredients: 

The stowaway universe. We don’t know exactly how many password-sharers are out there, but a fair body of research suggests three or more of every 10 U.S. Netflix account holders share their passwords with somebody outside of the immediate household. (Leichtman Research Group has reported the U.S. number for Netflix at 33%; Netflix itself reported in 2022 that 100 million subscribers, or nearly half the global total, shared passwords.) In North America, Netflix counted 74.4 million paid memberships — tantamount to household or individual subscriptions — as of March 31. A reasonable estimate, drawing from the sources above, is that there may be around 26 million Netflix password-sharing accounts in the U.S. and Canada. (Or roughly 35% of the North American total.)

Membership conversions. There are three swing votes here. First, what percentage of rogue users now relying on shared credentials will convert to their own paid accounts? Second, what percentage of members will agree to a $7.99 surcharge to keep their friends/family members aboard? (Note that in this case, it’s possible there may be little impact on Netflix’s net subscriber total, but a bump in monthly spending per account, as existing members will now pay more.) Third, what percentage of members will either disconnect altogether as a form of protest, as the research firms OnePoll and Samba warned, or will simply stop allowing others to log in? Regarding the first option — converting shared password users to paying accounts — it’s likely the range of conversions will be high by direct-marketing standards. Netflix has a keen advantage in that these users don’t have to be “sold” on the product. They’re already familiar at a level of intimacy, many of them maintaining unique identities, viewing histories and personalized content recommendations. Further, the cause is aided by the fact that Netflix now offers an advertising-supported iteration for just $6.99 per month. As a result, the economic barrier to entry is lower than ever. It’s a good time to be vanquishing rogue passwords. 

Normal churn. Netflix has been carefully guarding its churn metric out of competitive concerns. One of the more trustworthy estimates comes from category analyst Doug Shapiro, who cites Antenna data putting Netflix’s monthly churn rate in 2022 at around 3.3%. If we round down for simplicity to 3%, it suggests the service sheds about 2 million North American accounts every month and must replace them with newcomers in order to grow. 

Password-induced churn. It’s naive to think Netflix won’t lose some of its North American base because of the new password-sharing clampdown — maybe even a big chunk. If we believe that 35% of subscribers share passwords, and that around 10% of those account holders will cancel altogether (a bleak scenario, but one that’s possible), we can project that Netflix could lose as many as 3 million U.S. and Canada accounts during the current transformation period because of the pushback against the new password policy.

The growth challenge. In sum, it’s possible Netflix could lose as many as 5 million total North American subscribers in short order as the new policies take hold, 2 million from normal monthly churn and another 3 million or so because of password-related defections. In order to show net subscriber growth over this same period, Netflix needs to add at least one more subscriber than it loses.

Net additions. Can Netflix do it? Almost assuredly. In the pool of 26 million or so users currently drafting on a friend or family member’s credentials, Netflix possesses an enormous and enviable pool of gross-addition prospects who have a greater-than-usual propensity to sign up for their own accounts. If we apply a conversion rate of 25% to the pool of (26 million) password-sharers, then Netflix might rack up 6.5 million gross adds from a one-time phenomenon. Against our calculated loss of around 5 million, that sum indicates a bounty of more than 1 million net new memberships. If Netflix can hold down the number of cancellations to the sub-5 million level over roughly a one-month burst, the results could be even more striking. Also, not to be overlooked are the password-sharing households that agree to foot the bill for their hangers-on. How Netflix accounts for this new classification of customers will have impact on the reported subscriber totals. 

How the early returns play out won’t be known to investors and the general public until a few weeks from now. Internally, of course, managers at Netflix already can see where the trends are headed on a minute-by-minute basis. When the final tallies are known to the rest of us, they will serve as a reminder of the vagaries and uncertainty of third-party surveillance data. Forbes warned of major defections. Antenna saw little but upside. In the end, both may be right.  

As Netflix begins its password-sharing crackdown in the U.S., a new survey shows that nearly half of all the service’s users currently share their password — and making sharing more difficult is likely to result in cancellations or pushing some users to its ad-supported version.

The study, conducted by SambaTV and HarrisX, found that 51% of all streaming services subscribers share their account with others. For Netflix, the percentage is slightly lower, at 49%. (Disney Plus is at 48%.)

The reaction to an account-sharing crackdown varies by age. The study found that 37% of current Netflix subscribers said they would cancel their account if they could no longer share their password with people outside their homes. Among Gen Z respondents, the percentage was 52% and among millennials, it’s 51%.

Most of the people currently watching Netflix on someone else’s password say they would get their own account.  

Of the 64% who said they would get a subscription,  39% said they would get the lower-priced, ad-supported tier, with the remaining 25% getting an ad-free version. 

At its upfront, Netflix said that 25% of its new signups are picking the basic plan with ads and that 75% of ad-supported subscribers are between 18 and 49 years old.

“Data from Samba TV and HarrisX shows the crackdown on password sharing has the potential to hasten the growth of Netflix’s ad-supported tier as sharers are gently forced to migrate to their own accounts,” Samba TV CEO Ashwin Navin said. “Of those who currently use someone else’s Netflix account, almost 40% say they’d move toward the cheaper monthly subscription with ads, while only a quarter may sign up for their own ad-free experience.

“There's also an opportunity for Netflix to charge for these additional users. 4 in 10 subscribers say they’d pay up to an additional $10 per month to share their account with someone outside of their home,“ Navin said. “Implementing this new fee could quickly grow Netflix’s subscriber revenue.” 

The study is based on a survey of 2,506 U.S. adults conducted from March 23 to March 27. The sampling margin of error is plus or minus 2 percentage points.

If Netflix's password-sharing crackdown in the U.S. eventually evolves into anything like its current iterations in Latin America, the region where the new account-sharing policies are being developed and tested, things could get real real quick. 

Reading through a Netflix FAQ page that was published on Wednesday for the U.S. market, Netflix makes it real clear that it wants users of a single account to all reside in an individual household. 

As it already has in Peru, Chile and Costa Rica, Netflix is expected to implement in the U.S. in the coming few months "extra member" policies that charge accounts extra for those streaming on them regularly outside the home.

And for the most part, at least until Netflix implements those policies Stateside, the rules outlined in the new FAQ are pretty gentle and straightforward.

Basically, someone can use a phone, tablet, computer, streaming device or smart TV to stream Netflix via an IP address that's not identified by the streaming company as the primary one of the household. However, Netflix must now first "verify" the device before it can be used to stream the service.

The primary account holder will get an email or text with a link in it. Clicking on that link renders a four-digit code. The user of the outside-the-home device trying to connect will then have 15 minutes to punch the code into their device. 

Netflix's language for the U.S. FAQ is nice and gentle. While it encourages account sharers not living with the account holder to buy their own, the company adds that, "Netflix will not automatically charge you if you share your account with someone who doesn’t live with you."

And don't worry about traveling, either.

As Netflix also tracks the device IDs of the gadgets its users typically use in the home, streaming Netflix via your mobile device while you travel to, say, Costa Rica shouldn't be an issue. Even if you're there for an extended period of time, Netflix can just initiate the aforementioned device verification protocol. 

Things are much different for Netflix users if they live in Costa Rica. 

Netflix-subscribing denizens of this Central American nation -- like Chile and Peru, where account sharing policies have been tested by Netflix -- are now subject to new extra-member rules that require account holders to pay a few bucks extra each month for users not living with them, or block their devices from using their account.

There is no device verification protocol. And there is no gentle language saying it's all OK if you decide to taunt Happy Fun Ball and not abide by these rules. 

"If you want to share Netflix with someone who doesn't live with you, you can add an extra member to your account," reads Netflix's sternly stated FAQ for Costa Rica. 

Meanwhile, also in those regions in which extra-member policies have already been implemented, devices are only "trusted" and useable if they periodically "check in" with the home of the account (i.e. stream using the primary IP address). There's a whole bunch of language about device blocking in these particular iterations of the Netflix rulebook. 

Netflix said during its Q1 earnings report that 100 million of its homes share passwords, a factor that "undermines our long term ability to invest in and improve Netflix, as well as build our business." 

The extra-member policy, the company said, will be implemented in the U.S. in the coming months.

We've been warned. 

Netflix has introduced a new feature that lets users see who has accessed their account, from what devices, when most recently, and from what geographical locations.

The new "Manage Access and Devices" feature, which is accessible in the "Account" section of the Netflix homepage, also allows account holders the ability to give their exes and estranged the boot.

In a company blog posting Tuesday, Netflix said the feature will come in handy during the holiday travel season.

"With the busy holiday season just around the corner, many of our members will be on the move and watching Netflix wherever they are traveling to see family and friends. Logging in to your account while at a hotel or even your friend’s house is easy and intuitive, but lots of people then forget to log out," product manager Charles Wartemberg wrote.

With Netflix set to roll out a new system that charges members for account users not living in their home, the new addition seems to be a nifty prelude.

Also read: Netflix's Password-Sharing Crackdown Is Already a Mess

Certainly, as Netflix's ragged experience while testing different sharing crackdown schemes in Latin America revealed, the implementation could prove problematic.

Next TV looked at our own "Manage Accounts and Devices" profile and pondered the nearly half-dozen devices used by our oldest spawn, the 20-year-old, 6-5 college student and gourmet pickle salesman.

And we wondered, "How is this all going to work?"

Technically, this frequent out-of-home user is a Netflix member in good standing, his recent strong affection for HBO's Game of Thrones and House of the Dragon not withstanding. His shaggy noggin sleeps three miles down the road from us, on campus at USC most nights (er, mornings), but much of the 5,000-calorie-day-diet that maintains his rail-thin Shaggy-from-Scooby-Doo frame still comes from our refrigerator. And he's home all night -- usually once a week when he says he needs "real sleep" -- often enough to put the Hisense smart TV from his childhood bedroom in the recent rotation of "Manage Access and Devices."

Will Netflix still deem the kid a freeloader and force Next TV -- still reeling from global inflation and a long-ago reneged-upon promise of a big raise from a feckless former boss -- to pay $3 a month to keep him on the account?

Indeed, there's a lot of interesting information about the big global account-sharing crackdown yet to come. ■

After testing various systems in Latin America for monetizing usage of its service that doesn't occur in the homes of its members, Netflix said it's ready to deploy a formal plan early next year.

"We've landed on a thoughtful approach to monetize account sharing and we'll begin rolling this out more broadly starting in early 2023," Netflix said in its third-quarter letter to shareholders, published Tuesday.

Also read: Netflix Stock Booms as Streaming Company Beats Forecasts on Subscribers and Revenue in Q3

"After listening to consumer feedback, we are going to offer the ability for borrowers to transfer their Netflix profile into their own account, and for sharers to manage their devices more easily and to create sub-accounts ('extra member'), if they want to pay for family or friends," the letter added.

The investment community has nagged Netflix to crack down on freeloaders for years, but it wasn't until the streaming company's "Black Tuesday" Q1 earnings report in April that it showed it will do something about it.

Over the spring and summer, Netflix began testing in Latin America systems that charged users a nominal fee — $2.99, say — for each person not living in their home but using their account.

And earlier this week, the company formally announced a new feature, "Profile Transfer," that lets users easily port their user profile to another account — a precursor to Netflix’s crackdown next year. ▪️

Netflix introduced on Monday a new feature, “Profile Transfer,” which lets users move their personalized recommendations, viewing history, My List, saved games and other settings from one account to another. 

“People move. Families grow. Relationships end,” Netflix product manager Timi Kosztin blogged, touting the new feature. “But throughout these life changes, your Netflix experience should stay the same.”

The introduction of Profile Transfer comes with Netflix expecting a lot of current users to need it in the near-term future. 

Wall Street has complained about the large number of Netflix users living outside account holders’ households as an issue the streaming company should look at for years. But with its growth stalled over the spring, Netflix has finally identified freeloaders as a problem it should try to solve. 

Netflix is currently testing schemes in Latin America that charge account holders for users outside their domicile who are tapping into their account. 

Undoubtedly, when this system is developed and rolled out globally, there will be a lot of displaced current Netflix users who will have to establish their own accounts. And Profile Transfer will allow them to do so in a somewhat cohesive manner. ■

After grinding through tough A/B tests of new password-sharing policies in the Latin American markets of Peru, Costa Rica and Chile that started in March, Netflix expanded its testing in July to Argentina, the Dominican Republic, El Salvador, Guatemala and Honduras. 

So how's that going?

At least anecdotally in Argentina, once again ... the process seems to have been tough. 

The tech publication Rest of the World has tracked Netflix's testing in the region over the last six months. In its latest report on the matter, the pub spotlights the emergence of a backlash in Argentina, which seems to be corroborated, at least somewhat, by all the "#ChauNetflix" (bye Netflix) protest posts we found on Twitter. 

Rest of the World concedes that it has found no evidence of a third-quarter mass subscriber exodus in Argentina, one of Netflix's most densely penetrated markets with 4.5 million subscribers as of 2020. 

And even though Netflix is charging affected Argentinian users in pesos instead of U.S. dollars, insulating the test from currency dynamics that are particularly volatile right now, any consumer unease portrayed on social media is complicated by the complexity of local economic environment.

“I think Argentina is a really bad country to explore this [policy] as our economy is completely crazy. It’s not going to make sense for other countries,” Guillermo Mastrini, a professor specializing in mass media policies and economics at the National University of Quilmes and the University of Buenos Aires, told Rest of World.

Still, after experiencing turbulence amid testing in Peru earlier this year, Netflix seems intent on charging on.  

“We want to get it right,” Kumiko Hidaka, director of global product and technology communication at Netflix, also told the tech pub.   

Netflix said that as many as 100 million of its users globally are sharing passwords. 

Netflix has expanded its testing of a new feature designed to curtail the sharing of accounts outside the home. 

Netflix began testing its “add extra member” feature in May in Peru, Costa Rica and Chile, charging account owners a fee of around $2.99, depending on the region, for every individual outside their home using their Netflix password.

The testing reportedly didn’t go well, with local users confused about the nature of what constitutes a household, among other things. 

On Monday, Netflix announced additional testing of something it calls "add extra home" in Argentina, the Dominican Republic, El Salvador, Guatemala and Honduras.

In a blog posting, Netflix codified the scheme in more detail than its earlier Latin American trial. For example, it outlines what each tier can do: "Members on the Basic plan can add one extra home, Standard up to two extra, and Premium up to three extra."

Users can watch their Netflix account on the road, but only through computers and mobile devices. 

Importantly, if users don't pay for their out-of-home constituents’ usage, those outsiders will be blocked from using the account. 

Netflix said recently that as many as 100 million of its customers globally are sharing passwords with friends, family and hangers-on not living in the same building as they are. 

With its subscriber growth in recession, the subscription streaming provider has pledged to finally do something about this. 

“Today’s widespread account-sharing between households undermines our long-term ability to invest in and improve our service,” Chengyi Long, director of product innovation for Netflix, blogged. ▪️

Before committing to a global crackdown on password sharers at the end of 2022, Netflix in March announced a new test program of its go-to-market strategy in three of its less-profitable Latin American markets, Peru, Costa Rica and Chile.

According to a rather solid report by non-profit news org Rest of World, that test isn't going well. 

Rest of World interviewed 12 Netflix customers in Peru, and also talked to concerned local consumer protection agencies. The site reported ample confusion among local customers, many subjected to different rules amid the testing, and a seeming overall lack of understanding by all concerned as to what constitutes a "household." 

In Peru, customers sharing accounts with individuals who don't live in the same house or apartment were told they could add two outside-the-domicile users for 8 soles a month (around $2). That's an attractive option to each user relative to having to open a new Netflix account, which runs 24.90 soles a month (around $6.80) for a basic plan. 

Some users canceled their service outright. Others ignored the warnings and kept right on sharing. Still others talked to local Netflix customer service reps, unable to agree with them on the definition of “household.” For example, the concept of a son not living in your home — and no longer considered part of the household — didn't resonate with some. 

Netflix customer service agents in many cases simply tell confounded customers that they can receive a special voucher code as a workaround. 

Netflix also conceded that the test was progressive and that different customers in the region were subjected to different terms and pricing. 

This caught the attention of consumer watchdog groups in the test regions, who met with Netflix in April, expressing concern that customers were being treated differently. 

Certainly, at a time when Netflix's stock price is depressed, customer growth is in recession, and revenue expansion is declining, the development of the company's global password-sharing policy is under scrutiny and on a timeline. 

Netflix said that at least 30 million of its customers share passwords, meaning around 15 million customers worldwide (the “shareees,” as we might call them) don‘t pay for the service. 

By some estimates, Netflix could add $1.6 billion in revenue annually to its bottom line if it gets its password-sharing problem in control … without alienating a huge portion of its customer base. 

Latin America is Netflix’s lowest-revenue global region, with Brazil and Mexico representing its biggest contributors. 

Peru, Costa Rica and Chile represent lower impact stakes should tests run awry and trigger subscriber defections. But any lost souls — or soles, as the case may be — are attracting scrutiny for Netflix right now, from investors and competitors alike. 

“A lot of other services are going to wait for Netflix to bloody their nose before they do something similar,” said Parks Associates analyst Paul Erickson to Rest of World. ■

If and when Netflix adopts Stateside password-sharing fees currently being trialed in Latin America, 13% of U.S. subscribers surveyed said they'll cancel their Netflix service. And the streamer might actually end up losing a couple hundred million a year of revenue on the gambit. 

This is according to Aluma, a new research firm headed by former The Diffusion Group chief Michael Greeson. Aluma surveyed 2,200 adult U.S. consumers in April and asked them what they'd do if Netflix started charging an additional $3 for each family member, friend or hanger-on using their Netflix account, but not living their home. 

According to Greeson, 12% said they'd pay for at least one individual living outside their residence. 

During its legendarily downer first-quarter earnings report issued last month, Netflix said it was going to seriously look at making some of the 30% of users who share service worldwide pay their freight. Another research company, Bruce Leichtman's Leichtman Research, found that the password-sharing mob is pretty evenly split among those who pay and share (15%) and those who don't pay and take (15%).

Exploring the Possible Impact

So, given Netflix's North American base of around 75 million users, would, say, 9.5 million of them really cancel service overnight if Netflix started charging an additional $3 per month per password sharer?

Having spent two decades comparing "proclivities" declared during consumer surveys with actual behavior, Greeson believes "less than half" of cancellation threateners would actually end up following through on their declaration.

Still, if it were, say, 6.5% leaving the service, that would still represent around 5 million customers, and that's "$900 million in [annual] lost revenue," Greeson noted.

On the other hand, he believes that "at least 12%" of Netflix's domestic base would pay the extra $3.

“Adding $3 per month to a father’s Netflix bill versus his daughter at college having to pay $15 per month is quite compelling," Greeson said.

Continuing to do the "back of the napkin" math to indulge Next TV in a Thursday-afternoon email discussion, Greeson noted, "Assume they will sign up for on average of 1.2 out-of-home users per account. That’s nearly $260 million in new revenue."

Admittedly very speculative bottom line based on Aluma's compelling survey: Netflix could actually end up losing a significant amount of revenue on password sharing fees.

Meanwhile, addressing the broader narrative as to why Netflix has suddenly stopped growing, Greeson encouraged Next TV to look beyond a factor we've been aggressively hammering home -- that supply-chain-induced slowdowns of smart TV sales are the primary influencer.

"It’s larger than that," Greeson said. "Domestically, we’re nearing saturation in residential broadband subscriptions, which trickles down into smart TV/streaming device sales, as well as subscriptions to streaming video services. I predicted several years ago this would happen early in the 20s, which was logically obvious to anyone paying close attention to slowing subscriber/sales growth in these spaces."

Notably, Comcast and Charter, the leading suppliers of residential high-speed internet in the U.S., sold roughly half as many new ISP subscriptions in the first quarter relative to Q1 2021.

And no, based on this shareholder suit filed against Netflix Wednesday, a day in which streaming growth bubble might burst does not seem to have been "logically obvious" to Wall Street denizens.

Netflix password sharing is bad, but it's not that bad. 

That's the essential takeaway from a new Leichtman Research Group (LRG) survey of 4,400 U.S. households, which found that 33% of Netflix users share an account.

The data conflicts with another recent survey of 10,400 adults, conducted by the Advertising Research Foundation, which found that 49% of subscribers share their Netflix password with someone living outside their home. 

LRG's Internet-Delivered Pay-TV Services 2022 study breaks up that 33% of password sharers with the following behavior classifications. Editor's note: We made some clarifications after speaking to Leichtman principal Bruce Leichtman on Wednesday morning:

> 15% of Netflix services "are used and paid for by those that also share them with someone outside the household." These are the paid subscribers who do the sharing of their passwords with folks outside their home.

> 15% of Netflix services "are used in one household but are borrowed from another household that is paying for the service." These are the non-paying people who "borrow" the Netflix account of someone not living with them (aka the freeloaders).

> 3% of services "are used by multiple households that share the subscription cost."

> 3% of Netflix services "are not paid for because they come with another service."

The issue of Netflix password sharing has come up quite a bit of late, following Netflix's disclosure two weeks ago that it's testing in Latin America a new billing scheme that adds around $3 to the monthly bill for subscribers who share their Netflix password. 

Of course, password sharing is endemic to other direct-to-consumer streaming services. Overall, 29% of DTC subscriptions are shared with users outside the home. 

“Password sharing is an inherent feature of most streaming services," said LRG principal Bruce Leichtman in a statement. "Sharing helps to expand the user base and retain customers, but it also creates a gap between the number of households that have a service and actual paying subscribers. For example, about two-thirds of U.S. households report having Netflix, but this includes about 10% of U.S. households that don’t pay for the service because it is borrowed from someone else’s subscription.”

Netflix could add as much as $1.6 billion to its bottom line, says one equity analyst, by expanding a test it's currently conducting in Latin America, whereby it is charging extra to customers who share their passwords with constituents outside their home. 

“We think Netflix’s recent efforts reflect a natural progression across more mature markets and could add incremental subs and revenue if the test is rolled out globally,” wrote Cowen & Co. analyst John Blackledge in a note to investors. 

Last week, Netflix disclosed a test it's conducting in Peru, Costa Rica and Chile, whereby subscribers are now charged an additional monthly fee for sharing their passwords with up to two friends, family members and hangers-on living in their home. The fee varies slight from country to country, but it is $2.99 in Costa Rica.  

According to a recent survey conducted by the Advertising Research Foundation, nearly half of U.S. Netflix users share their Netflix username and password with a person -- or persons -- living outside their domicile. 

For his part, Blackledge estimates that 10% of the nearly 116 million broadband homes in America have individuals accessing Netflix without paying a subscription fee.

Blackledge bases his estimate on a hypothesis that half of Netflix's password-sharing subscribers globally begin paying the fee, which would spike Netflix's projected 2023 revenue of $38.8 billion by 4%. ■

Nearly half of U.S. Netflix subscribers share their username and password with friends and relatives living outside their home, according to a recent survey of 10,400 adults conducted by the Advertising Research Foundation. 

The finding frames a disclosure made by Netflix Thursday that it will begin charging users in Peru, Chile and Costa Rica and additional fee for each out-of-home constituent they share their Netflix account with. 

Netflix is describing the move as a "test." Members in the these countries will be allowed to add up to two "sub accounts," paying an additional fee. In Costa Rica, for example, users will pay an extra $2.99 if they want to add one or two out-of-home users to their account. 

"We’ve always made it easy for people who live together to share their Netflix account, with features like separate profiles and multiple streams in our Standard and Premium plans," blogged Netflix Product Innovation Director Chengyi Long. "While these have been hugely popular, they have also created some confusion about when and how Netflix can be shared. As a result, accounts are being shared between households -- impacting our ability to invest in great new TV and films for our members."

According to the Advertising Research Foundation survey, Netflix is the most shared among the major U.S. SVOD services, with 36 of users reporting sharing of their accounts with out-of-home relatives and 13% saying they even share their account with friends. 

Disney Plus sharing was almost as bad, but not quite -- 32% of users said they shared with relatives and 13% said they shared with friends. For Amazon Prime Video, only 22% of U.S. users said they shared with relatives and 8% shared with friends.

"We’ll be working to understand the utility of these two features for members in these three countries before making changes anywhere else in the world," Long added.

About 27% of all paid video service subscriptions in the U.S. are shared with others outside the household, according to Leichtman Research Group.

And around 16% of U.S. households use at least one subscription streaming video service that they don’t pay for. 

The data comes at a time of increased awareness about the issue of password sharing. Netflix is looking at ways to clamp down on those who crib passwords from friends and family members. And Citi recently revealed estimates that password sharing costs U.S. streaming companies $25 billion annually—and Netflix $6 billion specifically. 

For its latest report, Internet-Delivered Pay-TV Services 2021, LRG said it surveyed a robust cohort of 6,262 adult U.S. consumers. 

“Password sharing is prevalent throughout the streaming video industry,” said Bruce Leichtman, president and principal analyst for LRG, in a statement. “Over a quarter of DTC streaming video services are shared with others outside the household, including 12% of all services that are ‘borrowed’ from someone else’s subscription. Yet, sharing of streaming services should not solely be viewed as lost revenue, as the ability to share with others is also part of the retention strategy for the services.”

LRG also found that 82% of U.S. homes now have at least one of the top 11 direct-to-consumer  and subscription video services. And 51% of have at least three of these services.

Citi equity analyst Jason Bazinet said that password sharing costs U.S. streaming companies $25 billion annually in lost revenue, and Netflix owns about 25% of that loss. 

“As streaming services move to center stage, thwarting this theft will be of growing importance for shareholders,” Bazinet wrote in a note to investors Monday morning. 

The Citi analyst’s estimate comes 10 days after Bank of America published a note suggesting a “substantial percentage” of streaming subscribers are sharing their authentication credentials with friends, family and hangers-on outside their homes. 

And research firm Magid said that about a third of all SVOD customers share their password with at least one other person.

For its part, Netflix began earlier this month testing a new crackdown, in which it is forcing users of its service outside the account holders IP address to use third-party authentication. 

Netflix is also testing a 30-day free trial of its service. 

Netflix has started signing out users accessing its service from accounts based in another home, asking them to sign back in using a code sent to the account holder's email or mobile phone.

Earlier this week, Netflix users began posting on Twitter that they’re receiving onscreen messages reading, “If you don’t live with the owner of this account, you need your own account to keep watching.” The message also instructs these users to sign back in using a third factor of identification. 

“This test is designed to help ensure that people using Netflix accounts are authorized to do so,” a Netflix rep told The Streamable. 

Also Read: Original Shows Give Netflix A Big Edge in Streaming Wars

For years, Netflix has exhibited a somewhat laissez faire attitude toward password sharing, a poorly defined but generally accepted wind drag on the revenue for virtually all subscription streaming services. The company has managed the issue by controlling the number of simultaneous streams that can be employed by tier—starting with just one simultaneous stream for the $8.99 basic package and rising to four streams at once for the $17.99 premium iteration. 

Indeed, the video streaming business in general has never responded to password sharing with nearly the existential aggression of the music industry, which got Congress to pass broad, sweeping digital piracy laws. 

But Netflix does describe password sharing outside the user’s home or immediate family unit as a violation of its terms of service. 

And interesting data has emerged suggesting that the sharing issue might be significant. For example, a survey of 1,000 streaming video consumers conducted by research/publishing enterprise CordCutting in early 2019 found that one in five Hulu users shared their password with someone outside their home.

A new study of 2,000 U.S. adults with access to streaming services has found that 42% of them have either shared or received passwords since COVID-19 social distancing started in mid-March. 

The survey, conducted by OnePoll on behalf of AVOD service Tubi, found that sharing between romantic partners is most common, with 54% of password sharers identifying that relationship as one they swap digits with. “Friend” (53%) and “sibling” (42%) were also popular categories. 

In fact, mere “acquaintance” registered ninth on the list of most popular people to share a password with (17%).

A rep for the PR firm that presented the study, SWNS Media Group, said that the survey simply asked consumers if they've shared their password. It's hard to tell if some respondents confused illegal sharing (i.e. sharing with folks outside the home) with legal sharing conducted with partners, family members and hangers-on living in the their house and covered under terms of their service agreement.  

In any event, the survey seems to imply that illegal sharing is high right now. 

All of this password sharing is coming as viewers, stuck at home with their families and roommates, stream on average eight hours of video a day, according to the survey. 

"The industry’s eye is currently on the password ball, but it’s time to look for answers beyond login credentials, and find something more personal than even a password. It must be something that we can’t just give away — namely our devices." —John Kavanagh, Synacor 

Piracy. Abuse. Theft. Sharing. The common practice of giving a friend, relative or stranger login credentials so they can watch pay TV without paying has been characterized in several ways. Cable operators and some networks have made varying degrees of public comments, classifying the challenge as everything from a nuisance to a serious problem. Analyst firm Parks Associates projects that “password sharing” will soon be a $10 billion problem for operators.

Over-the-top and TV everywhere service uptake is booming, in part because operators and networks have enabled sign-in across many different devices and connected TVs. But being able to use many screens at once with a video subscription has contributed to the rampant password sharing plaguing the industry. A better strategy is needed fast as stakeholders seek to grow their OTT businesses while attempting to thwart viewing abuse that will soon have a major impact on already slimming margins.

The solution? Turn consumer devices into unique passwords that can’t be so easily shared and empower operators to monitor how many devices are being used with a video subscription.

Threading the Needle

Sending password sharing into decline will require a precise, multi-pronged approach that addresses the trends driving the practice while avoiding draconian security measures that will alienate subscribers. And what is it that consumers really want? High on the list are portability, value and simplicity.

Let’s talk cost and value first. Yes, there’s a stigma around cable TV being increasingly expensive, but the customized digital bundles from virtual multichannel video programming distributors and direct-to-consumer offerings from networks are starting to provide strong options for everyone, including the budget conscious. Even the major MVPDs are introducing these offerings, such as Comcast’s Xfinity Instant TV announced last year.

Password sharing is easier today because logging in to TV everywhere has gotten a lot more convenient than in its cumbersome early days. This simplicity shouldn’t change — in fact, it has to get even easier to bring more viewers into the fold. Overcoming this technical hurdle means giving service providers tools to monitor and enforce their viewing terms of service without hurting the subscriber experience.

Watching content anywhere with ease is getting better but it must continue to improve. Today, some TV everywhere services are the easiest to log into because they rely on home-based authentication, or the subscriber being connected to their service provider’s own broadband network for authentication. But subscribers need a solution that makes it easy for them to log in from any network. There continue to be rights issues to address on this front, but more flexibility is being introduced every day.

Focus On the Device, Not the Password

The industry’s eye is currently on the password ball, but it’s time to look for answers beyond login credentials, and find something more personal than even a password. It must be something that we can’t just give away — namely our devices. For instance, a subscriber could register a phone, tablet, PC and connected TV as devices authorized to access their pay TV service. Then they can manage all those devices online to easily spot any unauthorized usage.

Operators and networks also get greater control and visibility. If they’ve already authorized a device, they can keep the subscriber automatically logged in — forever if they choose. Because this approach is device-centric, operators can automatically authenticate content on any network, not just their own broadband service. This is critical to supporting out-of-home viewing because it requires visibility into how content is being accessed at all times. They can also monitor the number of concurrent devices accessing services to spot abuse or ensure usage is in line with contracts. In time, operators would gain an understanding of subscriber behavior and viewing patterns to further help detect and reduce fraud.

Sharing a password is easy; sharing a device … not so much. These are some of the fundamental strategies Synacor recently discussed when it met with the Cable & Telecommunications Association for Marketing and members of NCTA–The Internet & Television Association to discuss the issue. Pairing powerful content protection with a better viewing experience lets operators combat abuse while making it easier for TV fans to watch the content they love anywhere they go.

The right approach for any operator or network that is considering how to overcome password abuse while making service login even easier comes down to business goals and consumer demands. Is deeper engagement with TV everywhere services desired? What is a reasonable sign-in frequency? A better return on investment? Is there a desire to let users watch on the devices of their choice?

It may come as a surprise that a device-centric approach to login could be the answer.

John Kavanagh is vice president, product management, at Synacor, a technology and services company.

Synacor says it’s taking aim at video subscription password abuse with Forever Login, a new upgrade and feature for its Cloud ID authentication system that, it claims, will hold benefits for MVPDs as well as pay TV subscribers.

On the MVPD end of it, this enables them to maintain control of the number of concurrent devices are allowed to be signed into authenticated TV Everywhere services as well as the length of time before viewers need to log in. That latter part, length of time, could be set in perpetuity so long as a trusted linkage has been established between a device and the TVE application/service. The same could also be applied to virtual MVPDs that require customers to enter their credentials to access their subscription service.

On the other side of the service ledger, consumers have the ability to register trusted devices, such as tablets, smartphones, smart TVs and TV-connected devices, as part of an operator’s TVE sign-in process. Once that level of trust is established, it’s possible for the consumer to access TVE content without having to reenter their passwords, whether they are viewing that content in or out of the home.

Consider it a step beyond automated in-home TVE authentication that established trust when the consumer had a device connected to the home network. Many Synacor TVE authentication customers wanted to offer a similar process that eliminated the need for pay TV subscribers from constantly having to reenter their credentials while they were outside the home as well, John Kavanagh, executive director of identity services at Synacor, said.

“They wanted to deliver the same user experience benefit…and we brought the trust along with it with device registration,” Kavanagh said. “The end-user experience of home-based authentication really set a high bar. They wanted to take that high bar and extend it elsewhere.”

Synacor said Forever Login can be paired with its Single Sign-On technology, which lets users log in across multiple apps.

It’s starting to introduce the new feature to a subset of its current customers, with Service Electric Cablevision the first to be identified. Other Synacor customers include Sling TV, PlayStation Vue, AT&T, HBO, WideOpenWest, Armstrong Cable, Atlantic Broadband, CenturyLink Cable One, Cincinnati Bell, Mediacom Communications, Verizon, GCI, Hotwire, Charter Communications, Windstream, and Grande Communications, among others.

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Password sharing among friends and family has been a concern that’s been aired publicly by MVPDs such as Charter. 

A recent study from Hub Research and CTAM that tracks the TV Everywhere market shed some light on password sharing with friends and family. The survey, based on 3,491 MVPD subs 18-74 who watch at least five hours of TV per week, found that 28% said password sharing with a friend of a family member or a friend of theirs is permitted, and 33% said password sharing is permitted for a family member who lives outside their household permanently. 

However, the greater concern are “commercial-level” illegal activities and dark markets that buy, sell and exploit those credentials, Kavanagh explained.

Device-level trust adds another layer of security for MVPDs while also making the sign-in process an easier one for consumers, while also providing more transparency to both.

“Once we’re able to register that device securely as part of the sign-in flow, we then connect that with a complete list of devices that have been used with a given subscription, Kavanagh said. “We not only expose that master list to the end user for their own benefit on things that might be suspicious, but on the operator side, it gives them a depth of awareness they haven't had before. It allows them to have a fine instrument to enforce their business rules and security policies."

If there does appear to be suspicious activity occurring on a device, or there’s fear that a password was stolen, consumers also have a self-care capability whereby they can monitor usage and even remotely log off a device or terminate a device’s connection to the subscription service.