Password Sharing Crackdown: Disney Emulates Netflix to Enhance Security on Disney+ and Hulu
In today’s world, where streaming services are as common as the television sets were to our parents and grandparents, Disney is stepping up to address the issue of password sharing, taking a leaf out of Netflix’s book. This isn’t just about putting an end to a widespread habit (Reed Hoffman famously equated sharing a password to an act of love), but it’s also about navigating the complex world of digital streaming, where competition is fierce and the pressure to turn a profit is high. A recent Wall Street Journal report, drawing on data from November 2023 provided by subscription analytics firm Antenna, highlighted a rise in the cancellation rate for major streaming services to 6.3%, up from 5.1% the previous year.
Disney Draws a Line in the Sand on Password Sharing
- Taking Cues from Netflix: Inspired by Netflix’s successful crackdown, which resulted in an uptick in subscribers, Disney is rolling out similar restrictions for Hulu and Disney+.
Netflix’s move to clamp down on password sharing outside the family home has evidently paid off. Just six months into their policy enforcement in the U.S., they saw a surge in subscriber numbers that beat all expectations. Last month, they celebrated yet another quarter of growth, the third in a row, despite continuing to enforce this policy and even bumping up their subscription prices.
- A Necessity for Growth: Faced with a decline in Disney+ subscribers, the company is looking to tighten the reins on password sharing to enhance monetization and secure its revenue streams.
Disney has made good on its promise, informing subscribers across its platforms, including Disney+, Hulu, and ESPN+, about updates to the subscriber agreement last month. These updates specifically target the sharing of accounts outside a subscriber’s household, with the new rules already in effect for new subscribers as of January 25 and set to apply to all existing subscribers from March 14.
- Setting a Trend: Disney’s stance could potentially inspire other streaming platforms, such as Max (formerly HBO Max) and Peacock, to reevaluate their own policies on password sharing.
Understanding the Larger Context
The fact that most households subscribe to an average of three streaming services underscores the significance of Disney’s decision to enforce password sharing restrictions. This isn’t just a policy change; it’s a strategic move designed to redefine the economics of digital content consumption.
Implications for Disney’s Audience
- Stricter Account Monitoring: Subscribers to Disney+ and Hulu should brace for more rigorous account checks and sharing restrictions.
- Adapting to Change: With the new policies rolling out, subscribers might find themselves having to adjust to new norms, potentially leading to the kind of subscriber backlash Netflix anticipated. But remember… they grew subscriptions while increasing prices. Sometimes people get angry, but if they love Netflix, they usually pay or will pay. Does Disney+ hold the same brand energy that Netflix does? Older colleagues of mine will point to Disney brand data and say that it does, but Gen Z and Millennials live on Netflix. It is part of their cultural DNA.
- Because of brand devotion with younger people, I would hypothesize that Disney+ and Hulu will experience greater subscriber churn risks following crackdowns — especially if they are perceived as being a customer inconvenience. Moreover, Disney+ is currently trying to integrate Hulu into its native app, while it just partnered on a streaming app… It has a lot going on. A poor password crackdown strategy could ding it with customers who are on edge with the streaming service. For me, it has become a lot easier decision after Disney slashed content spend. They aren’t making as many of those $200M shows anymore and they are not commissioning as many now, so it won’t be changing in the next few years at least. Until Disney better meets the lofty Wall Street expectations it set for its streaming service, customers will also have to get used to fewer blockbuster new original releases.
Future Prospects
As the streaming industry finds itself at a crucial crosswords, faced with the industry headwinds, platforms are exploring new ways to generate revenue, including through price increases, password sharing crackdowns, and introducing ad-supported models. As Disney, and possibly other services, tighten control over account sharing, we’re likely to see significant shifts in how digital content is accessed and paid for across the digital landscape as well. I expect that crackdowns against password sharing will expand beyond just streaming video and move into other subscription services. Companies would be smart to follow the Apple bundling approach and trying to encourage family plans as a discounted offer.
In sum, Disney’s approach to password sharing represents a key moment for the streaming sector, signaling a shift in the broader dynamics of digital content distribution and economic strategy. As we move forward, finding a balance between user satisfaction and financial sustainability will be essential for the ongoing evolution of streaming platforms and more.
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