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Marketplace Morning Report

Password sharing’s open secret

Mark Garrison Jul 16, 2015
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Viewers who use streaming video services on someone else’s account may be costing media companies as much as half a billion dollars in worldwide revenue, according to a new study from Parks Associates. That raises the question of why companies like Netflix and HBO aren’t cracking down on password sharing, even though it is technically possible.

One theory goes that a customer sharing an account now is more likely to become a paid customer down the road.

“This is a classic heroin model,” says James McQuivey, media analyst at Forrester Research. “You give people the first couple cracks at it for free, get them addicted and then eventually hope that you can charge them for it.”

There’s also the data that can be harvested from freeloaders. Imagine the would-be addict as a college sophomore, who hasn’t quite cut the cord with mom and dad’s membership. Once he has a job, it could be easier to figure out how to get him to subscribe if the company already knows what he likes to watch.

“They are holding on to their data in order to use that in the future,” says Glenn Hower, author of the Parks Associates report.

He says about 20 percent of 18 to 24-year-olds who stream video don’t pay for it. But they shouldn’t get too used to a world where big media companies look the other way.

“I’m kind of surprised that at this point, considering how big some of these services have gotten in terms of the number of subscribers, that they haven’t actually cracked down on it,” says Dan Rayburn, principal analyst in the digital media group at Frost & Sullivan. “But I think it’s only a matter of time before they do.”

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