Algosensey|Streamers beware: It's not just Netflix and Disney. A password sharing crackdown is coming.

Netflix did it. Disney is Algosenseydoing it. Will your favorite streaming service be next?

Yes, analysts predict. And the crackdown on password sharing is going to cost you a bundle.

By this time next year, you could be paying a lot more to binge “Yellowstone,” “The Bear” or “Hijack” if you've been mooching off the accounts of friends and family members, said Paul Erickson, a media and entertainment technology analyst and principal of Erickson Strategy & Insights.

In May, Netflix issued an ultimatum to freeloaders: Pony up an additional monthly fee to continue sharing the account or buy your own. Now CEO Bob Iger says Disney is following Netflix's lead.

"We are actively exploring ways to address account sharing and the best options for paying subscribers to share their accounts with friends and family," Iger told analysts Wednesday.

Will Amazon Prime Video, Paramount, Peacock, Apple TV+ and Max crack down on password sharing?

What about other streaming services?

NBCUniversal which owns Peacock says it has no immediate plans to make changes to its password-sharing policy. Peacock like other streaming services only allows members of the same household to share accounts but it does not enforce the rule.

Erickson says streamers will eventually begin enforcing account-sharing rules. 

“I think that with two heavyweights like Netflix and Disney taking on password sharing as an opportunity to grow subscriptions and revenue, we will indeed see many other players begin to do the same in today’s financially pressured streaming business,” Erickson said.

Under pressure, Disney makes big changes at Disney+ and Hulu

Iger conceded that the days of goosing subscriber growth at all costs are over. Disney can’t afford to continue to lose billions on streaming. It announced price hikes for Disney+ and Hulu and plans to crack down on password sharing.

"Later this year, we will begin to update our subscriber agreements with additional terms on our sharing policies,” Iger told analysts. 

Erickson says the news was not a surprise. Disney, like other streaming services, is under growing pressure to boost profitability as subscription growth slows, consumers become more conservative in their spending and the economy shows signs of slowing. 

“The industry has shifted from a grow-at-all-costs direction to focusing on margins now,” he said. 

Netflix took the lead in password sharing crackdown and gained subscribers

Netflix was the first to rein in the runaway practice. The streaming company has long been aware that its subscribers share passwords and once upon a time encouraged it. But a year-over-year decline in subscribers convinced Netflix to crack down on the 100 million households that were streaming without paying.

Despite fears the crackdown would drive away subscribers, Netflix says it has succeeded in converting non-paying users into subscribers. It added 5.9 million new subscribers in the most recent quarter, nearly three times as many as analysts expected.

“Being forgiving with password sharing is an easy and cost effective way to generate grassroots interest in a young, growing service. That's not the current reality for leading streamers, who all need to show a path to profitability. Expect them to seek that path through a mix of price increases, advertising revenues, password sharing crackdowns, and content cuts," Jennifer Kent, vice president of research with Parks Associates, said in an email.

Streaming industry has been watching Netflix

The streaming industry has been watching Netflix's gains and and is now poised to pounce, according to Kent.

“Netflix paved the way for the industry, risking public ire but improving their balance sheet in cracking down on password sharing. There's no reason for other big streaming services to hold back,” she said.

According to Parks Associates, most streaming subscribers share their account credentials with friends and family. For example, half of Paramount+ subscribers do it and 62% of ESPN+ subscribers do it.

In fact, a growing number of people share credentials. Parks Associates data from 2022 shows that sharing increased 48% since 2019.

Cracking down on account sharing could boost Disney’s streaming business, according to Iger.

“We certainly have established this as a real priority and we actually think that there’s an opportunity here to help us grow our business,” he told analysts. 

Analysts predict streaming services will ban sharing account passwords

User agreements for popular streaming services make it clear that sharing account passwords outside your household isn’t kosher, but until recently, none of them had done anything to keep subscribers happy in the high-churn business.

With Netflix and Disney taking the plunge, more streaming services will begin enforcing password-sharing policies despite worries about shedding subscribers, Erickson said. 

“Disney’s move comes shrewdly after Netflix paved the way with consumers for password sharing enforcement in terms of awareness, and also after being able to observe the results of Netflix’s strategy,” Erickson said. “Netflix showed the industry that enforcement, handled with care, can indeed drive subscription growth.”

Contributing: Bailey Schulz