A coalition that includes Netflix Inc., HBO and cable-industry titans is stepping up efforts to crack down on password sharing, discussing new measures to close a loophole that could be costing companies billions of dollars in lost revenue each year.
Programmers and cable-TV distributors are considering an array of tactics to cut off people who borrow credentials from friends and relatives to access programming without paying for it. The possible measures include requiring customers to change their passwords periodically or texting codes to subscribers’ phones that they would need to enter to keep watching, according to people familiar with the matter.
Some TV executives want to create rules governing which devices can be used to access a cable-TV subscription outside the home. While someone logging in from a phone or tablet would be fine, someone using a Roku device at a second location could be considered a likely freeloader, one person said.
If none of those tactics work, pay-TV subscribers could someday be required to sign into their accounts using their thumbprints.
“I feel like I’m beating my head against the wall,” Tom Rutledge, the chief executive officer of Charter Communications Inc., said during an earnings call last month. “It’s just too easy to get the product without paying for it.”
But taking more aggressive measures poses risks. The people using services for free — especially younger consumers — may never agree to sign up for a subscription, no matter how many hassles they endure. That means companies would mostly just be alienating paying customers, who could get frustrated and stop using an app or cancel their service. In other words, there’s plenty of downside and possibly little upside.
“If you ask any cohort of young people if they will ever pay for Netflix or video services, the answer is unequivocally no,” said Mike McCormack, an analyst at Guggenheim Securities.
The pay-TV industry is projected to lose $6.6 billion in revenue from password sharing and piracy this year, according to Parks Associates. By 2024, the number could grow to $9 billion, the research firm said.
Two years ago, some of the biggest names in entertainment and technology formed a group called the Alliance for Creativity and Entertainment, which was devoted to reducing online piracy. Last month, the group announced that it’s turning its attention to password sharing. Participants include Netflix, Amazon.com Inc., Walt Disney Co., Viacom Inc., AT&T Inc.’s HBO, Comcast Corp. and Charter.
There’s no consensus on where to draw the line.