Tom Rutledge has had enough. The chief executive officer of Charter Communications Inc., which sells cable TV under the Spectrum name, is leading an industry wide effort to crack down on password sharing. It’s a growing problem that could cost pay-TV companies millions of subscribers—and billions of dollars in revenue—when they can least afford it.
“There’s lots of extra streams, there’s lots of extra passwords, there’s lots of people who could get free service,” Rutledge said at an industry conference this month. The CEO has said that one unidentified channel owner had 30,000 simultaneous streams from a single account.
Charter, which operates in cities including New York and Los Angeles, isn’t the only company tackling the issue. Researchers at Walt Disney Co.’s ESPN network recently asked a group of about 50 millennial sports fans how many of them shared passwords. Everyone raised their hand, said Justin Connolly, executive vice president for affiliate sales and marketing for ESPN and other Disney networks.
“It’s piracy,” Connolly said. “It’s people consuming something they haven’t paid for. The more the practice is viewed with a shrug, the more it creates a dynamic where people believe it’s acceptable. And it’s not.”
Cable and satellite carriers in North America have lost 3 million customers this year alone. But the prevalence of password sharing suggests many of those customers, and possibly many more, are watching popular shows like “The Walking Dead” for free, robbing pay-TV providers and programmers of paying subscribers and advertising dollars.
Most pay-TV companies only require users to re-enter their passwords for each device once a year. During contract negotiations this fall, Charter urged Viacom Inc., home of Comedy Central and MTV, to help limit illicit password swapping. The cable company wants programmers to restrict the number of concurrent streams on their apps and force legitimate subscribers to log in more often, according to two people familiar with the matter who asked not to be identified discussing private deliberations.
ESPN, meanwhile, has reduced the number of simultaneous streams that it allows on its app to five from 10 and is considering cutting that to three, Connolly said. ESPN wants to work more closely with distributors to validate subscribers when there are high volumes of streaming on its app outside the cable company’s territory.
The problem stems from an industry concept called TV Everywhere. Started in 2009, the idea was an attempt to appeal to young consumers by letting them access cable or satellite shows on any device. TV Everywhere was slow to catch on but is gaining popularity as more people get used to streaming on phones or tablets.
About one-third of internet users stream cable TV without paying for it by using credentials of someone they do not live with, according to Parks Associates. The TV industry’s losses from password sharing are expected to rise to USD 9.9 billion by 2021 from USD 3.5 billion this year, the research firm estimates. That lost revenue is especially important because the pay-TV industry is already losing subscribers to cheaper online rivals like Netflix Inc.
“It’s become more of an issue, and it’s being exacerbated by cord cutting,” said Campbell Foster, director of product marketing at Adobe Systems Inc., which sells software that media companies use to monitor the location and number of people streaming their apps from each account.
Media executives have insisted for years that password sharing wasn’t a big problem, viewing it as a way to market their content to the next generation. In fact, some companies still say they’re not worried.
Password sharing “is still relatively small and we are seeing no economic impact on our business,” said Jeff Cusson, a spokesman for HBO.
Most credentials are being swapped among friends or relatives, Foster said. Parents, for instance, will often let their children at college stream from their accounts. The TV industry, for the most part, is fine with that but worried about those students sharing credentials with their friends. Some passwords are sold in dark corners of the internet, Foster said. Adobe sees an uptick in illicit streaming before major sporting events.
“You’ll see legit owners of accounts who do not know their username and password is being shared with 50 people,” he said.
But cracking down on password sharing can be risky. If logging in gets too cumbersome, cable subscribers could get frustrated and cancel. ESPN wants to make it easier by automatically recognizing subscribers who are on their home Wi-Fi or using their own device.
“You’ll see legit owners of accounts who do not know their username and password is being shared with 50 people”
“I’d hate to see this go the other way and become a bad consumer experience and people wonder, ‘Why can’t my son access TV?’” said Himesh Bhise, CEO at Synacor Inc., which manages streaming service log-ins for HBO Go and other programmers and TV distributors such as Altice, Dish and PlayStation Vue.
For now, the industry can’t agree on a crucial question: How many people should stream from one account while also preventing widespread password swapping? The policies among pay-TV operators, programmers and streaming services vary.
Netflix allows four streams for its most expensive subscriptions and one at a time for its cheapest plans. HBO lets three people stream simultaneously from one account. DirecTV’s satellite customers get five concurrent streams, while its online service, DirecTV Now, allows two.
The number of streams is important, Charter’s Rutledge says, because about one-third of homes have just one person living in them. If those single homeowners share the extra streams with friends and relatives, Charter is losing out on potential customers, he said.
So who’s to blame for the lost revenue from password sharing? Rutledge points the finger at channel owners for not doing enough to secure their apps.
“They devalued their own product in a dramatic way,” Rutledge said.
But programmers say they need to work with cable operators like Charter to tackle the problem because distributors often have different approaches. For example, if a distributor allows 10 streams from its app and ESPN allows five from the ESPN app, that’s potentially 15 people who could be streaming a sporting event from one account simultaneously.
“Programmers and distributors have to work in close collaboration to create any effective solution for this,” said Disney’s Connolly. “This is not something we feel we can ignore.” – Bloomberg Quint