Credential sharing could help, or harm, OTT services

The practice of sharing passwords so that more than one person or household can access a streaming service has financial ramifications for the industry, according to a new report, though it could also provide new services with a boost in the market, said 3Macs analyst Troy Crandall. “In a way, sharing credentials can sometimes be somewhat of a marketing tool, especially if you’re just starting out,” he said in a phone interview. “Over time, obviously you do have to get a better handle on it.” He added that “it actually can be beneficial for them when they’re in the marketing, high-growth phase.” Canada’s largest two streaming services are set to begin competing directly with each other for the first time, as the companies behind the services make them available to all Canadians online with no other subscriptions required. Shomi and CraveTV entered the Canadian market late last year. Thus far, Shomi has been restricted to Shaw Communications Inc.'s and Rogers Communications Inc.’s Internet or TV customers, and BCE Inc.’s CraveTV to those who subscribe to TV service from Bell and some other telecoms, including Telus Corp. and Eastlink. Shomi is set to become available to all Canadians by the end of summer, while Bell will open up CraveTV in the same way on Jan 1. Credential-sharing might be an advantage to those services in the short term, Crandall said, though “once they start seeing their subscriber numbers pick up, maybe not so much.” Parks Associates calculated earlier this month that credential sharing will cost the global over-the-top (OTT) industry $500 million US in revenue worldwide this year. That’s out of a forecast for $11 billion US in global subscription OTT video service revenues for 2015, Parks Associates analyst Glenn Hower said in an email. “So we’re talking about a four to five per cent loss in direct revenues to credential sharing,” he said. Smaller, new services are especially vulnerable, he said in a phone interview. While “$500 million doesn’t seem like a huge deal … when you’re incorporating all the smaller startup streaming services with those services that don’t scale quite to the scale that Netflix does, any loss revenue is potentially bad.” Hower added: “When you’re talking about direct revenue loss, I mean, yes, that hurts people like Netflix and Hulu, but it certainly stands to hurt some of the smaller guys, too, that are trying to eke out a profit on a $3.99-a-month subscription.” That includes U.S. niche services like Crunchyroll Inc., which offers animated content for $6.95 US a month, or A&E Television Networks LLC’s $3.99 US-a-month Lifetime Movie Club. Hower said he expects concern about credential-sharing to increase as revenue from OTT services becomes more significant to companies —for example, if we see a rise in more expensive OTT and live-TV hybrids like Sling TV. Parks Associates found in a survey earlier this month that six per cent of households with broadband Internet in the United States use an OTT video service registered to someone outside of the home. Twenty per cent of respondents between the ages of 18 to 24 reported using other people's credentials for OTT streaming, Parks Associates said, a proportion that was down by half among those aged 25 to 34. The online survey, conducted in September 2014, involved 10,000 broadband households and had a margin of error of plus or minus one percentage point, Parks Associates spokeswoman Holly Sprague said in an email. Hower said there is a group among those younger demographics that he expects will “grow out of it and will subscribe to legitimate services, but I think there is a very sizeable group that won’t, and that could potentially hurt a good portion of the industry.” A Consumer Reports survey from earlier this year found even higher numbers of credential-sharing. According to a survey released in January, 46 per cent of streaming service users share their login info with people outside the household. “Netflix subscribers were the most charitable, with 46 per cent admitting they shared their password. Hulu Plus was next with 37 per cent, followed by Amazon Prime with 29 per cent,” Consumer Reports said in a press release. Those numbers were gathered by the Consumer Reports National Research Center in a phone survey of 1,005 U.S. consumers in December 2014, with a margin of error of plus or minus 3.1 percentage points. Hower said credential-sharing is “an incredibly grey area.” There are some differences in how different companies are approaching it, he noted. Netflix Inc., for instance, tells users they “should not” share password information, which some consumers might see as a suggestion, not a rule. Time Warner Inc.'s HBO has also been “fairly tolerant in the past about password sharing, and in some cases, their CEO has even tacitly encouraged it as a form of marketing.” In the case of Hulu, it allows only one stream per account at a time, according to its website. “There’s wild inconsistency in streaming video as far as credential-sharing goes,” Hower said. In Canada, Shomi’s terms of service limit the number of concurrent streams to two, but do not mention a total number of devices or sharing within or outside of a household. In an emailed statement, Shomi general manager David Asch noted the service allows users to set up six individual profiles per account. “As we prepare to go direct-to-consumer in the very near future, access to Shomi will be easier than ever," he added. The set-top box version of CraveTV can only be watched within the household the account is assigned to, Bell Media spokesman Scott Henderson said in an email. The service can be streamed on two devices at the same time, in addition to set-top box viewing, while five devices can be connected to one account, he added. Crandall said setting a maximum number of devices that are allowed to connect to an account is one option for services that want to limit credential sharing. They can also keep track of those devices by using the media-access control (MAC) addresses of device, though Crandall described that option as “kind of draconian.” He added that, in a family with multiple smartphones, tablets and computers, it might be difficult to “arbitrarily” choose how many devices to allow. “Plus, any time somebody bought a new one or got rid of an old one, you have to go into the settings, delete the old MAC address that was permissible and add the new one,” he said. Another option — though it would be “a pain and not really customer friendly” — would be a GPS setting that would only allow customers to watch if they were within a certain radius of the house, he added. Broadcasting consultant Kelly Lynne Ashton said recommendation functions of services like Netflix can be a disincentive to share login information, and one option for Canadian video-streaming services would be to improve their personalization features. “If your friend is going to screw up your recommendations or your place when you’re bingeing Friends, that’s going to stop you from sharing,” she said in a phone interview. “So that’s something that I think that our Canadian OTT services need to work on if sharing of accreditation is an issue." — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Credential sharing could help, or harm, OTT services

Broadcast | July 17, 2015

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Credential sharing could help, or harm, OTT services

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