At the same time that Netflix Inc. (NFLX), Amazon.com Inc. (AMZN) and Hulu are in a cutthroat battle for subscribers, they have to contend with a different form of competition: Millennial customers are sharing their logins and passwords with family and friends.
While sharing passwords to access streaming content isn’t as common among older views, for millennials and younger consumers who grew up with a smartphone in their pocket, it's becoming an increasing problem. That’s according to Magid, the media research firm, which told CNBC that 35% of millennials share their passwords for streaming services. That’s much higher than the 19% of Generation Xers that share their subscriptions and 13% of baby boomers that engage in the practice. According to CNBC, the streaming content providers are losing hundreds of millions of dollars in potential sales from subscribers that don’t have to join because of the sharing habits of their friends and families. (See also: Netflix Breakout May Boost Stock 11% Short Term.)
Sharing Streaming Content Passwords to Get Worse
That may not be much of a concern for the leading streaming content providers—they have all long said it’s not an issue and could actually result in new customers—experts told CNBC the problem is getting worse. According to Jill Rosengard Hill, executive president at Magid, millennials are currently the most voracious password sharers, but those 21 and younger are doing it at an even higher rate to the tune of around 42%. They are likely to have gained access to streaming services via family accounts and stayed on those accounts even as they entered adulthood. What’s more, Hill said those 21 and younger are more likely to share their passwords with friends than their older counterparts. (See also: Walmart to Enter Video Streaming Space: WSJ.)
Streaming Services Providers May Clamp Down On It
Even though the streaming content providers are losing millions in potential subscribers, CNBC noted that the terms and conditions of all the major players spell out that the content is not to be shared with others but notes that if users share access they are responsible for the actions of the people they share their password with. That language and others like it shows that the companies aren’t seriously enforcing their sharing policies. That may change as more streaming service providers move away from advertising and rely on subscriptions to make money.
Daniel McCarthy, a marketing professor at Emory University pointed to Hulu as one example. With the company losing money, it is under a lot of pressure and could clamp down on password sharing. CNBC noted that Hulu loses around $1.5 billion a year.