How bad is the password-sharing epidemic for online video services like Netflix, Amazon Prime Video and Hulu? So bad that Charter CEO Tom Rutledge admits he heard from one content company that a single subscriber has been recorded as supporting 30,000 concurrent video streams. That's one video consumer sharing credentials in a way that allows friends, family or maybe complete strangers to watch 30,000 video streams at the same time.
There are plenty of reasons why the traditional pay-TV bundle is in decline. But by far, the hardest one to argue with is the fact that many consumers can get access to premium TV content for pennies on the dollar, or even for free.
Rutledge acknowledged at the UBS Global Media and Communications conference that when it comes to measuring the impact of password sharing, "by definition, nobody knows how bad it is." Anecdotally, however, evidence that the economic consequences are significant is beginning to mount. College students use their parents' credentials to access TV online. Recent graduates share passwords with friends so that everyone gets a discount on streaming services. And the number of millennials signing up for conventional pay-TV bundles is dropping.
At the recent TV of Tomorrow conference, recent MBA graduate Courtney Miller, who is also Associate Manager of Multicultural Marketing at Home Box Office Inc. (HBO) , talked about being tempted by the new online skinny bundle that Time Warner Cable Inc. (NYSE: TWC) is testing out in New York. A promotional deal has TWC giving away a free Roku box with the skinny bundle. Since Miller was already considering a Roku purchase, the deal was attractive. Ultimately, though, Miller decided Time Warner Cable's monthly fee was bound to increase in the future, and that it was a safer bet just to buy a new Roku outright.
Also, Miller readily admitted that she shares passwords for online video services with friends, so she already gets a lot of the content she wants cheaply anyway. It's not that Miller doesn't watch TV. Far from it. She stated clearly that she watches a lot of TV. It's that she doesn't want to pay a lot for good content, and so far, she hasn't had to. (See also FiOS TV Director Cuts the Cord.)
There is a solution to password sharing. As Charter Communications Inc. 's Rutledge pointed out, "It can be managed. You can manage how many streams and where they go, whether they're in the house or out of the house, what the behavior patterns of the streams are, how many of them are simultaneous, how many locations there are. And you can build algorithms to reduce the unauthorized usage."
The industry, however, has to take action across the board to measure and control where video streams are going. And today, programmers and distributors are all putting their content online in lots of different places, making it difficult to keep track of how consumers view it.
Ironically, if the pay-TV industry does figure out how put a rein on password sharing, it could help consumers in a number of ways. It could, for example, smooth the way for new competitive video services, like the one Apple Inc. (Nasdaq: AAPL) was considering but has now apparently abandoned. (See Apple Presses Pause on OTT TV – Reports.)
Until the industry does solve the password-sharing problem, however, programmers and distributors are going to continue to be skittish about how they develop and support online products. TV Everywhere? It won't really happen until everyone gets paid, and paid well to make it happen.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading