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Netflix, Hulu, Amazon miss out on money as Millennials share passwords

“We do believe that access to content creates perceived value of that content and will lead to a higher willingness to pay,” Hill said. But, “if the content is something they value, they’re going to find a way to access it.”

Users 21 and younger are also more likely to share passwords among friends than older generations, Hill said. They consider paying for one service as having paid into the ecosystem.

And if I’ve bought in, why not spread the wealth?

“Sharing can be extremely desirable, especially if there are no explicit costs,” said Sudeep Bhatia, a professor of psychology and marketing at the University of Pennsylvania.

“Giving my friend my password is unlikely to influence my own viewing experience, but it’s likely to create a stronger bond between the two of us,” Bhatia said. “By sharing my password I am giving something to my friend. This triggers reciprocity motivations and strengthens our relationship.”

As for why freeloaders cling onto an ex’s login: They’ve already established they can get access for free.

“Paying for his or her own subscription feels like a loss of $10 with no corresponding gain,” Bhatia said.

Crafty users don’t lose the $10, but companies do.

The terms and conditions of all the major streaming services note access to content is for personal use and not to be shared with others. But, the contracts note, if users do share access then they’re responsible for the actions of that third party. And if you are sharing, then the terms insist you keep it within the set limit of simultaneous streams. And if that limit of simultaneous streams is too restricting, well, you can pay a few extra dollars to raise it.

It’s those kinds of caveats that demonstrate the companies’ unwillingness to police inappropriate sharing, said Daniel McCarthy, a marketing professor at Emory University.

“As we move away from an advertising-only revenue model towards people paying for subcriptions more, it has to carry with it the rise of sharing,” McCarthy told CNBC in an interview. “Companies like Hulu, they are under pressure right now because they are losing a lot of money” from general operations.

Hulu loses in the neighborhood of $1.5 billion a year, according to recent financial reports by its major stakeholders.

There’s a positive spin to be put on password-sharing as a customer retention strategy, McCarthy said. It’s harder for users to cancel the subscription if it would pull the plug for friends or roommates too.

Companies also face a certain level of risk in cracking down on sharing: acting on false positives, or losing out to services that are more amenable to groups.

“There’s errors of omission and errors of commission. The errors of omission is what’s happening now — they’re not really policing who’s sharing with who,” McCarthy said. “The problem with the error of commission (in policing inappropriate sharing) is it comes at much higher cost.”

source : CNBC

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