Password Sharing. PHOTO: Cybercrime Magazine.

Is Netflix Suffering Billions In Losses Due To Cybercrime?

Video streaming giant gets defensive

Steve Morgan, Editor-in-Chief

Sausalito, Calif. – Mar. 12, 2021

“Passwords are for treehouses,” says Frank Abagnale. They’re also for unauthorized access to Netflix, the world’s most popular video streaming service.

About one-third of Netflix users share their passwords with people outside their household, according to a survey conducted in early 2020. It’s quite possible the COVID-19 pandemic has driven that number way up with so many people tied to their homes.

Netflix has 204 million users globally, according to a recent estimate. 74 million users are in the U.S. where the entry-level Basic service costs $8.99 per month *.

If the math is correct, then around 68 million Netflix users are sharing their passwords and violating the terms of use they agreed to: “The Netflix service and any content viewed through our service are for your personal and non-commercial use only and may not be shared with individuals beyond your household.”

Netflix is theoretically losing more than $600 million per month, or more than $7.3 billion annually due to unauthorized password sharing. These figures assume all unauthorized users would have to pay for a Basic account to legally view content. There’s no way to know how many of those people would pay if it were the only way to access Netflix.

To come up with your own numbers, choose a percentage of cheaters who must pay and estimate if they’ll go for the entry-level Basic service or the pricier Standard subscription at $13.99 per month — or the Premium level at $17.99.

Is Netflix a victim of cybercrime? It’s hard to point the finger at a single user guilty of sharing their password and calling them a cybercriminal. But the collective monetary losses suffered by Netflix are massive.

The state of Tennessee passed a law in 2011 which made it a crime to share passwords for Netflix accounts and other popular online sites. An opinion issued by the U.S. Ninth Circuit Court of Appeals Court in 2016 found that sharing passwords is a crime prosecutable under the Computer Fraud and Abuse Act (CFAA).

In 2020, Netflix had revenues of around $25 billion. What would a few billion more dollars in annual revenue contribute to their stock price and market cap?

Abagnale, whose story provided the inspiration for Steven Spielberg’s 2002 film, “Catch Me If You Can,” starring Leonardo DiCaprio as Abagnale and Tom Hanks as the FBI agent fast on his heels, calls passwords antiquated and one of the biggest reasons the world suffers financial losses due to cybercrime.

While Netflix doesn’t appear to be going passwordless anytime soon, they are testing a new feature to crack down on shared passwords.

It’s possible that tens of millions of Netflix viewers will suddenly lose access. If that comes to pass, then what will it mean for Netflix’s revenues? And will it have a negative impact on its viewership numbers?

Either way, Netflix appears to be taking a defensive posture to ward off non-paying viewers, an about-face from 2016 when their CEO Reed Hastings encouraged password sharing

There are varying opinions around whether sharing passwords is actually illegal, or punishable, but one thing is clear: Netflix reserves the right to terminate an account due to a violation of its terms of service.

We’re still thinking this one through. Tell us what you think.

Can I borrow your Amazon Prime account anyone?

* The cost for Netflix varies by country. For instance in India it is 499 Rupees, or $6.85 per month US.

Steve Morgan is founder and Editor-in-Chief at Cybersecurity Ventures.

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