And she’s not alone, roughly 2 in 5 online adults share passwords to online accounts according to Pew. Password sharing has become a cultural phenomenon, whether signaling a new level of commitment in your relationship or the pleasant surprise that someone forgot to log out at your Airbnb. It’s no big secret – and likely by design to encourage usage - but what does the future of password sharing look like with emerging headlines like, ”Netflix password sharing is costing the company billions.”

With Netflix’s first quarter decrease of 200,000 subscribers, followed by another million today, losses unthinkable in recent years and one they haven't experienced in over a decade, the streaming giant has been receiving a lot of attention about its growth plans. Diversifying content and reaching new audiences might be one obvious long-term solution, but Netflix is reportedly taking a harder look at curbing account sharing as a way to protect revenue and encourage subscription growth.

Netflix is also experimenting with sharing fee models in the Latin American market. In March they introduced a $3 fee that is assessed for accounts shared beyond a household in Chile, Costa Rica, and Peru. More recently in Argentina, El Salvador, Guatemala, Honduras, and the Dominican Republic, they initiated prompts to pay a $1-3 fee to add additional homes when shared usage is detected via indicators like device IDs, IP addresses, and account activity. There is talk that these sharing fees will be introduced more broadly in 2023, coinciding with a launch of a less-expensive ad-based subscription in partnership with Microsoft advertising technology. But with so many other streaming options available in the U.S. market, some already far less expensive than Netflix, could plans backfire?

TL;DR surveyed 983 U.S. Consumers between the ages of 18 and 65 in May to understand streaming (and sharing) usage, as well as assess how an imposed sharing fee might affect their choices. We specifically asked about past and current usage and consideration of the top six streaming providers in the U.S., namely Netflix, Amazon Prime Video, Hulu, HBO Max, Disney+, and Apple TV+. All data was weighted to U.S. Census rates of age, gender, and region.

What we found

With 38% of U.S. streamers willing to admit to sharing in a survey, we were keen to measure how that population is distributed across streaming services.

Here, Netflix has the highest number of users sharing, though its ratio of sharers to paying subscribers is much more favorable relative to other streamers. Amazon Prime Video follows Netflix in overall market share, but with a lower proportion of users sharing possibly due to a concern they may also be sharing their Prime account used for other purchases. Streamers with lower market share have relatively higher proportions sharing, with sharing potentially offering an opportunity to increase exposure and demand for each of their services.

With its incumbency status, Netflix certainly has the brand equity, market share, and prowess to continue tolerating sharing. So why such a scare at the first drop in subscribers? New sharing fees may be a short-term knob to turn that helps boost numbers and revenue for shareholders, but will it pan out into a long-term strategy to gain new subscribers?

We asked all streamers, even those who reported that they do not currently share passwords, what they would do if their service were to assess a $5/month fee for those sharing passwords outside of their household, with the following choices to select from:

Of those who said they would pay the fee to continue sharing the account, we then asked what they would do if the imposed fee was increased to $10 / month. Here is how their responses broke out.

While streamers were evenly split on what action they would take, the way the streaming service was being used (purchased vs. shared) influenced how they reacted to the fee. Users who buy and share streaming accounts were the most willing to pay an imposed monthly fee for sharing and least likely to churn. No surprise that “freeloaders” were least likely to pay or stop sharing accounts if assessed a fee – they most often said they wouldn’t pay and would continue to share the account. And interestingly, the introduction of a sharing fee created the highest rate of churn among those who say that they do not currently share their accounts at all– perhaps because they anticipate future price increases if any sharing fees are enacted and accepted by the user base – or our questioning that implied that they might actually be sharing passwords stung with offense or culpability.

How sharing fees could impact the bottom line

The churn rates created by the hypothetical introduction of $5 and $10 sharing fees were relatively consistent across services averaging 18% and 23%, respectively. Apple TV+ was the clear exception with sharing fees inciting only 8% or 11% churn. So, we wanted to understand how these fees might affect revenue for each service. Could the revenue generated by the new sharing fee offset the revenue lost via churn?

To mockup these scenarios, we made a few assumptions:

• On average, 5% customer churn rate exists even before any sharing fee is introduced.

• Those who would not pay the sharing fee, but also wouldn’t stop using the service, would be permitted to stay and pay the standard subscription fee with no additional fee.

• We priced out the middle tier of each streaming service, opting to not include any basic/ad-tiered pricing or premium options since they are not available across all providers. The operative prices included in our model are shown below.

We arrived at our conclusions by calculating the revenue gains introduced by those willing to pay sharing fees and offsetting those by any revenue loss caused by customer turnover, and then averaged into a monthly revenue per subscription unit (ARPU). These typically take into account all forms for revenue, but to keep it simple and avoid too many assumptions, we only looked at the impact of sharing fees on a single subscription price.

What we found was that, in some cases, sharing fees work, but in other cases, they hurt.

All services except Netflix see a slight increase in ARPU with a $5 sharing fee introduced, and Apple TV+ could benefit from upping that to a $10 sharing fee (a move that would triple the price of the service, meaning Apple TV+ may be underpriced today). But Netflix, on the other hand, would see an overall negative impact to ARPU with any sharing fee introduced.

Netflix must proceed carefully, as a strategy favoring short-term gains may give ground to the other services making moves to chip away at Netflix’s lead. Combined with recent subscription price hikes in Q1 2022, brand equity may take a hit too. Netflix must consider whether being first mover to crackdown on sharing is a move they want to make given the strong competition for consumers’ attention and streaming dollars. Challengers to Netflix, especially those with diversified revenue streams, may use the opportunity to permit or even encourage sharing to further erode Netflix’s lead.

While this data may not give challengers sufficient permission to introduce their own sharing fees, our findings highlight that demand for some of these services mean they could withstand potential price increases (possibly fueling the development of additional exclusive content) or that their popularity could increase if Netflix gives subscribers a reason to look elsewhere. With the sunset of Stranger Things and corresponding sunrise of Ted Lasso Season 3 (Apple TV+) on the horizon, it could be a dangerous game to play.

So, as a Netflix subscriber (and admittedly a sharer too), I will be watching Selling Sunset and Netflix’s account sharing strategy progress over the next couple months.

What will you watch… and would a sharing fee change that?