Netflix’s 2017 password-sharing tweet “Love is sharing your password” backfired as nearly half its users shared accounts by 2022, causing market share loss. Initially, Netflix encouraged sharing for growth but faced revenue decline and stock price drops due to competition like Disney+ and HBO Max.
To address this issue, Netflix considered implementing multi-factor authentication (MFA) but realized it could hinder access for paying users and not effectively target non-paying users. Instead, Netflix opted for a more user-friendly approach, using device-level and geolocation signal intelligence to monitor user access, adding difficulty for non-paid users while maintaining ease of use for subscribers.
In 2020, the market for subscription abuse prevention was still developing, with vendors in the authentication and fraud detection sectors lacking comprehensive solutions designed explicitly for subscription abuse. Netflix’s demand for a solution to password sharing spurred innovation in this sector, creating a market focused on subscription abuse prevention. Liminal now estimates the global subscription abuse prevention market for streaming and online entertainment to be valued at $1.29B in 2023 and is projected to reach $2.32B by 2027 with a CAGR of 15.8%. This evolution represents a significant shift in how digital content providers manage and secure user access to their services.
Subscription abuse, defined as violating subscription terms to avoid or reduce payment, is a growing concern for businesses, especially in the streaming industry. With 1 in 4 Americans using borrowed streaming account logins, platforms like Netflix and Disney+ are losing significant potential revenue, estimated at around $10 billion annually. In response, Netflix, which saw its market share drop by 13% since 2020, has shifted from its previous leniency on account sharing to implementing measures to combat it.
Streaming platforms have started using low-friction, device-level, and geolocation data-tracking solutions to prevent subscription abuse and enhance revenue. These efforts have shown results; for instance, Netflix reported a 7.7% increase in revenue year-over-year after initiating a password-sharing crackdown. This strategy includes scrutinizing IP addresses, device IDs, behavioral analytics, and biometrics.
The trend of combating subscription abuse is gaining traction across various industries. A 2023 Liminal Market Study found that 48% of businesses consider password sharing and subscription abuse key issues to address. Consequently, the global market for subscription abuse prevention is expected to grow to $2.32B by 2027.
With this growth, platforms are increasingly looking for third-party vendors that can offer practical solutions to thwart free users without compromising the user experience for paid customers. The primary use cases for these solutions extend beyond streaming and online entertainment to include regulated gaming, e-commerce, online marketplaces, and workforce management. Challenges in this sector include ensuring transparency in data collection, preventing user circumvention, and assuring age verification.
Proposed Subscription Abuse Prevention Process Flow
To combat subscription abuse, businesses use third-party vendors or in-house solutions to analyze user session data, focusing on device information, IP addresses, location data, and VPN usage. These vendors track and compare this data across sessions to identify patterns indicative of account sharing. For example, if an account is accessed quickly from multiple geographically distant locations, it suggests multiple users. Detecting VPNs is also crucial, as they can mask a user’s location and IP address. Once account sharing is identified, the subscription service can take steps like issuing warnings, demanding additional verification, or restricting access to ensure compliance with service terms and protect their revenue. To illustrate this proposed process flow for subscription abuse prevention, log in or sign up for Link and see page 4 in the Outside-In Report: Consumer Subscription Abuse Prevention.
Why Now?
Streaming platforms use subscription abuse prevention to optimize revenue in the face of shifting priorities while account-sharing concerns grow among new business types seeking frictionless authentication solutions.
Streaming Wars and Revenue Challenges: The “Streaming Wars” have led streaming platforms to focus on optimizing revenue per user. With the entry of Disney+ and HBO Max, Netflix’s market share dropped by 13% to 33%, while Disney+ and HBO Max gained 8% and 10% respectively. By Q2 2022, 100 million users were accessing Netflix for free, with many also using other platforms without paying. Facing a $9.1 billion loss in 2019 and projected losses of $12.5 billion by 2024, Netflix and others are actively combating password sharing to convert free users into paying subscribers.
Expansion of Subscription Abuse Beyond Streaming: The challenge of password sharing and subscription abuse now extends beyond streaming, affecting industries such as e-commerce, payments, crypto, and gambling, with 55% of businesses treating it as a priority. In the workforce, 34% of American employees share passwords for internal tools, often driven by the need for cost reduction and collaboration. For example, many consumers share accounts across various services like Spotify, Airbnb, Amazon, Netflix, and Uber.
Rising Demand for Smooth Authentication: There’s a growing need for authentication solutions that balance user experience (UX) with security. A Liminal study reveals that 88% of businesses cite password sharing as a significant factor in selecting authentication methods. The trend is towards AI-enhanced technologies that simplify logins without compromising security. Businesses prefer solutions analyzing data like IP addresses, geolocation, and device IDs to differentiate between legitimate and unauthorized users. Notably, 45% of respondents favor adaptive and risk-based authentication for its efficacy in protecting platforms and preventing unauthorized access.
6 Key Trends Shaping the Subscription Abuse Prevention Market
Trends in the subscription abuse prevention market range from top-line growth initiatives in streaming to illuminating subscription abuse prevention capabilities in new use cases. Age assurance and data privacy initiatives challenge the viability of passive signal analysis.
- Revenue Optimization Amid Streaming Wars: The competition among major streaming companies like Netflix and Disney is increasingly focused on converting non-paying users into paid subscribers, driven by investor expectations.
- Broader Application of Abuse Prevention: Originally practical in streaming, subscription abuse prevention solutions are now in demand in other sectors, such as regulated gaming and online marketplaces. These platforms require sophisticated data analysis to prevent unauthorized access.
- Moving Beyond Traditional Authentication: Streaming services are shifting away from one-time-passcode (OTP) systems, which still allow account sharing, in favor of more innovative revenue-optimizing solutions.
- Economic Factors Fueling Account Sharing: The rise in subscription costs and changes in consumer spending can lead to more subscription abuse, increasing the need for effective third-party prevention solutions.
- Challenges from Data Privacy Regulations: Data privacy initiatives like Apple’s restriction on third-party cookies make it more difficult to access user data for fraud detection, pushing vendors to develop new, less intrusive methods.
- Impact of Age Assurance Regulations: New regulations requiring parental consent for data collection on children’s platforms complicate the deployment of subscription abuse prevention solutions, especially those involving passive data analysis.
For a full view of the impacts of these trends, access Link and view page 6 of the Outside-In Report: Consumer Subscription Abuse Prevention.
Related Content:
- Outside-In Report: Consumer Subscription Abuse Prevention
- Outside-In Report: Age Assurance Technologies to Meet Regulatory Compliance and Refine Service Delivery
- Can Age Assurance Technologies Help Build Digital Ecosystems of Trust?
- Market and Buyer’s Guide for Transaction Fraud Prevention in E-Commerce
