Netflix price hike may spur growth in illegal password sharing

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Gabby Jones | Bloomberg | Getty Images

Netflix's recent price hike might fuel growth among a different group of viewers: password borrowers.

The streaming giant recently announced an upcoming price increase of 13 percent to 18 percent. The fee hike will raise the cost of the cheapest plan to $9, up from $8. The company's HD standard plan will cost $13, up from $11. Finally, its 4K premium plan will rise to $16, up from $14.

Suddenly, borrowing sign-in credentials from friends and family seems like an attractive idea for the cost-conscious.

For what it's worth, streaming platforms already know you're sharing your passwords. And they're not happy about it.

"Password sharing is something you have to learn to live with, because there's so much legitimate password sharing, like you sharing with your spouse, with your kids …. so there's no bright line, and we're doing fine as is," said Netflix co-founder and CEO Reed Hastings during Netflix's third-quarter earnings webcast in 2016.

Netflix notes in its Terms of Use that passwords "may not be shared with individuals beyond your household," so when users sign up for an account, they automatically agree not to share. Other content streaming services generally have similar language.

When contacted for comment, a spokeswoman for Netflix referred to the company's terms of service.

And what if you don't follow the rules? Unauthorized password sharing can be considered a violation of the U.S. Computer Fraud and Abuse Act, according to a July 2016 ruling by the U.S. Ninth Circuit Court of Appeals.

While streaming services generally haven't cracked down on those who share passwords, they do retain the ability to monitor how you use their service and may send warnings to violators.

"If users begin to bump each other off of the same Netflix account, some will likely opt to get their own account." -Brett Sappington, senior director of research at Parks Associates

Streaming providers have ways to keep tabs on unusual activity.

For instance, Cisco Systems offers streaming platforms a program that tracks users' activity and flags unusual times and locations when someone logs into an account.

Media streaming services also attempt to crack down on password sharing by limiting the number of screens members can use.

This way, one account can only play a certain number of videos at one time. The only way around this limit is to either pay for an additional account or upgrade to more screens.

"Netflix's business model already addresses password sharing to some degree through higher priced tiers of service that allow more people to sign on at the same time," said Brett Sappington, senior director of research at Parks Associates, a market research company that specializes in consumer technology.

Password sharing costing companies millions as companies try to pinpoint issue Password sharing cost millions for streaming companies like Netflix

That $8 or so you save monthly may not mean much to you, but it adds up for the companies.

Streaming providers will lose an estimated $550 million this year from password sharing, according to an analysis by Parks Associates. However, companies have to weigh whether it is worth it to go after abusers.

"As video services, Netflix and HBO do leave some money on the table by not cracking down on password sharing, which they could do," Sappington said.

"But as content producers, both companies benefit from maximum consumer awareness of (and demand for) their original programming," he said. "Those original programs are what is driving uptake of consumer subscriptions."

Ultimately, it comes down to risk versus reward.

"Higher prices will make people consider their options more carefully, including password sharing," Sappington said.

"However, consumers are also weighing the level of convenience, which has always been a big motivator," he said. "If users begin to bump each other off of the same Netflix account, some will likely opt to get their own account."

Still, it's possible to share passwords with any number of people. Some services are more sharing-friendly than others.

Netflix

Tero Vesalainen | Getty Images

Netflix allows you to create up to five profiles on one account. Its different plans come with streaming limits.

Basic plan users can stream on one screen at a time, for $9 per month. The standard plan, at $13 per month, allows two screens to stream at once. Its premium plan allows use on four screens at a time, which costs $16 per month.

Netflix may have the most people in the U.S. sharing passwords: 24 million, according to estimates from CordCutting.com.

Amazon

Amazon joins streaming battle

Amazon Prime lets you add a second adult onto your plan, so long as you register them through Amazon Household and you both agree to share payment methods.

This way, you each keep your own personal accounts, but you share the benefits of Prime membership, including Prime Shipping.

Up to four teens aged 13 through 17 can also be added to the accounts.

That doesn't cover people "mooching" off of friends' or families' accounts and using them under the account holder's name.

Amazon didn't respond to multiple requests for comment.

As for streaming, you can stream up to three videos on different devices at one time, but can only two people can watch the same show at the same time.

Hulu

Hulu streaming Ted Soqui | Corbis | Getty Images

If you pay for Hulu or Hulu + no ads, you're limited to viewing on one screen at a time.

It's worth noting Hulu + Live TV, which starts at $44.99 a month, allows for streaming on two screens at once. There's also a $14.99 per month option to add unlimited screens, but that's limited to Hulu + Live TV plans and can't be extended to the $5.99 basic plan or the $11.99 no-ad plan.

YouTube TV

CNBC | Todd Haselton CNBC | Todd Haselton

YouTube TV, which costs $40 a month and is owned by Alphabet's Google business unit, allows households to share passwords, with limits.

Families of up to six people can stream videos on up to three devices at one time. When signing up for an account, users have to register their zip code to confirm location and services available. Google did not respond to a request for comment.

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