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Netflix, Inc. (NASDAQ:NFLX) Users Sharing Account Passwords, Details With Others

Netflix Inc (NASDAQ:NFLX)

Netflix, Inc.  has a sharing problem. Reed Hastings, Netflix CEO, has hinted in the past that the digital streaming services is coming up with ways to make sharing account passwords details a lot harder. After new research suggests the problem is widespread, Netflix may have to act quick.

Most Netflix Users Sharing Passwords With Others

New data from GlobalWebIndex (GWI) suggest that about two-thirds of Netflix users are sharing account passwords and details with non-Netflix subscribers.

Thirty percent admit to sharing their account with one other person, 15 percent share it with two people and 19 percent share it with at least three people.

Just about one-third (35 percent) reports to be the only users of their account.

The research was compiled by surveying 5,721 American and British Netflix users between the ages of 16 and 64. One of the key questions was: “You said that you used Netflix last month. Are you the only user of your Netflix login/account, or do you share it with other people?”

Simply put: for every one paid Netflix   subscriber, there are two non-paying users streaming the service. This could turn out to be a huge loss in revenues and profits for the company.

In fact, according to a recent study from Parks Associates, Netflix could lose an estimated $500 million in 2015 because of global account credential-sharing. Moreover, “The Cost of Piracy” report discovered that six percent of U.S. households utilize a streaming service unregistered by any household member. What’s troubling is that it’s mostly young people taking part in this practice.

Netflix, which has about 65 million international users and has been growing thanks to overseas adoption, does offer multiple account types:

  • Basic: $8 per month; number of screens to watch on is just one.
  • Standard: $9 per month; number of screens to watch on is two.
  • Premium: $12 per month; number of screens to watch on is four.

What this means is that four individuals could pool together $3 each to pay for the $12 monthly plan as opposed to each person doling out $8 for the basic plan. The company doesn’t exactly forbid you from sharing your account. In its Terms of Use, it just states:

The member who created the Netflix account and whose Payment Method is charged is referred to here as the Account Owner. The Account Owner has access and control over the Netflix account. The Account Owner’s control is exercised through use of the Account Owner’s password and therefore to maintain exclusive control, the Account Owner should not reveal the password to anyone.” (emphasis ours).

Industry Not Cracking Down on Issue

Despite the enormity of lost revenues, the industry seems rather indifferent. This is surprising considering that these types of firms are losing out on half a billion dollars.

In 2013, Hastings said in a conference call that account-sharing wasn’t a problem.

HBO CEO Richard Plepler said in an interview last year he doesn’t really care about password-sharing because it doesn’t have much of an effect on the overall business model.

To be honest, it’s not material to our business,” he said. “It’s not that we aren’t mindful of it, but it has no real effect on the business.”

Why the laid back attitude? Industry professionals aver it’s actually an old marketing technique. Consumers who access, for instance, HBO Go’s content will be accustomed to it and will eventually pay for the monthly subscription.

They want everyone to come on over from the cable dark side,” independent technology analyst Carmi Levy stated in an interview. “They don’t want to be seen as heavy handed, they want to get everyone locked in and then they’ll figure out enforcement later on.”

Although this seems to be a common practice, one over-the-top digital streaming service has finally started to take action.

World Wrestling Entertainment, Inc. (NYSE:WWE) announced in March that it has restricted account-sharing to its WWE Network. Company executives have identified in the past, and now it appears the sports entertainment promotion has taken the matter seriously.

Will streaming services tackle the problem head-on? In the short-term, it doesn’t seem likely.

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.

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