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Below is a complimentary Demography Unplugged research note written by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.

Streaming Services Cracking Down On Password Sharing? - 6 9 2021 9 54 17 AM

Streaming services are cracking down on password sharing among users. As competition tightens and spending on programming soars, the streaming giants are hoping to discourage this behavior. (Associated Press)

NH: Sharing passwords for streaming services has become a common practice. You give me your HBO Max login, and I’ll give you my Disney+ account.

A Pew survey found that 41% of internet users have shared a password with a friend or family member. And a Leichtman Research Group survey found that 16% of households use at least one subscription that is paid for by someone else. 

Alas, this free ride may soon be over.

Last year, Disney admitted they were actively monitoring password sharing among its customer base.

And just this March, Netflix tested a program where users had to prove they were the account owner by entering a code sent to their phone or email. 

Password sharing is a significant drain on revenue. Park Associates, a market research company, predicts that streaming services lost $2.5B in 2019 due to this behavior. By 2024, lost revenue could be as high as $3.5B a year. 

Why are these services just now cracking down?

Because the whole streaming landscape is becoming lower-margin and more competitive. Many of these companies are ramping up their investments in original programming.

The first season of Amazon’s Lord of the Rings TV show will cost an estimated $450M. Meanwhile, as the endless addition of new services threatens to pull away users, subscriber growth for many of the original streaming services (Netflix, Hulu, etc.) is slowing down.

The streaming giants need every last dollar they can get. 

It's not going to be easy. If a company suddenly clamps down hard on password sharing, disgruntled consumers may just abandon the service altogether.

Inevitably, given the companies' quest for more revenue and the consumers' desire not to pay, discounted streaming with ads is likely to be where the industry ends up.

Despite early promises not to go there, several companies are already moving toward the ad-supported model.

In time, a streaming service that looks a lot like the old network TV model (including sponsorships and product placement) could become the norm.

It's like zero legroom in passenger aircraft: No one likes it, but no one wants to pay for the alternative.

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Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."

Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.

Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.

Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.