MAX, Disney+ follow Netflix to limit password sharing – but does it go too far?

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At the March 2024 Morgan Stanley Technology, Media & Telecom conference, Jean-Briac Perrette, President and CEO of the Global Streaming and Games segment of Warner Bros. Discovery (WBD), made the motivations clear: “(As we’re) trying to get to $1 billion of EBITDA from the $2 billion loss in ’22 to $1 billion of EBITDA in ’25 … we’re at the precipice … of delivering on that growth promise. And we think you … are going to start seeing the building blocks of that pan out over the next few quarters.”

In addition to launching in new global markets, WBD is introducing new programming bundles that include live sports – one of the most pirated content categories – introducing an ad-supported tier, and an anti-password-sharing initiative is underway.

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“I’m conscious of not over selling (password sharing) because you see Netflix’s success, but Netflix was in market for 17 years,” said Mr Perrette.  “We’ve been in market for 4 … But we think there’s — relative to the scale of our business, it’s a meaningful opportunity.”

Revised on February 27, 2024, MAX’s Terms of Use sets parameters for what constitutes a household: “(U)p to five (5) authorized user profiles on your Max Account … limited to members of your household.”

The Terms also declare that “We can modify access or disable features, including for security reasons, to limit the impact of account sharing outside of your household or where we have concluded in our discretion that there has been misuse of your Max Account,” and that “In addition to the foregoing, we can modify access or disable features, including for security reasons, to limit the impact of account sharing outside of your household or where we have concluded in our discretion that there has been misuse of your Max Account. If a suspension or termination occurs, you must stop using the Platform.”

Disney too

The Walt Disney Company has followed the Netflix example.  We knew it was coming: Disney CEO Bob Iger declared during an August 2023 earnings call that account sharing terms were coming later in 2023, followed by “tactics to drive monetization sometime in 2024.”

Sure enough, the January 2024 version of its subscriber agreement, Disney+ declares that “you may not share your subscription outside your household … (which consists of) the collection of devices associated with your primary personal residence that are used by the individuals who reside within.”

During its Feburary 2024 investor call for Q1 2024 (the quarter ended on December 31, 2023), Disney CFO Hugh Johnston revealed that “account holders who want to allow access to individuals from outside their household will be able to add them to their accounts for an additional fee. While we … don’t expect notable benefits from these paid sharing initiatives until the back half of calendar 2024, we want to reach as large an audience as possible … and grow our subscriber base.”

Hulu’s subscriber agreement, revised on January 25, 2024, uses nearly identical language.  Both agreements say that “We may, in our sole discretion, analyze the use of your account to determine compliance with this Agreement. If we determine, in our sole discretion, that you have violated this Agreement, we may limit or terminate access to the Service and/or take any other steps as permitted by this Agreement.”  As Piracy Monitor readers well know, an extensive ecosystem of technologies exists to detect and mitigate infringing account usage.

No AI scraping either

The Disney+ subscriber agreement also defends against theft by generative AI tools, delcaring that “you will not nor permit another person” to “access, monitor, copy, or extract using the Services using a robot, spider, script or other automated means, including, for the avoidance of doubt, for the purposes of creating or developing any AI Tool, data mining or web scraping…or contributing to any collection of data, data set or database (other than for a public search engine’s use of spiders for creating search indices to the extent not disallowed by us, including through the applicable robots.txt files or NOINDEX or NOFOLLOW meta-tags)”

Similarly, Warner Bros. Discovery’s MAX terms say that “You may not… Copy, data mine, scrape or in any way extract any Content or data for the purpose of training any artificial intelligence algorithm, system, model or tool or any large language or machine learning model or any similar technology.”

Further reading

Warner Bros. Discovery Inc (WBD) Morgan Stanley 2024 Technology, Media and Telecom Conference (Transcript). March 5, 2024. Seeking Alpha

Walt Disney (DIS) Q1 2024 Earnings Call Transcript.  February 7, 2024. Motley Fool Transcribing. The Motley Fool

Disney sees password-sharing crackdown as ‘opportunity to help grow our business,’ Bob Iger says.  Article. August 10, 2023. By Todd Spangler.  Variety

Why it matters

Limiting password sharing has proven to be an effective way to reduce access while preserving streaming revenue.  Programmers need to protect against unlicensed consumption of content that’s been stolen and redistributed illegally.  At the same time, they have to minimize costs.  On top of that, there’s consumer retention: streaming subscribers come and go, and then come back again when programming appeals to them.

It’s a complicated situation: how do you optimize for all four of these goals without penalizing legitimate paying subscribers?  And  carelessness about respect toward copyright by generative AI platforms adds an entirely new dimension.

Some tactics are necessary.  For example, while Disney’s Q1 2024 revenue was up, and while “entertainment streaming operating income (increased) by a remarkable 86% year over year,” … “Disney+ core subscribers decreased sequentially by 1.3 million … driven by the expected temporary uptick in churn, given the recent domestic price increases,” according to Disney CFO Johnston.  And this article opened with WBD’s ambitions toward a dramatic turnaround.

But when does it go too far? Why, for example, would a streaming service want to diminish its value proposition by removing content from their libraries, and consumer pricing at the same time?  Why drive people elsewhere – including to piracy sites – to find something that was available no more on the legitimate service (unless there are unavoidable business terms, such as the expiration of a distribution license without renewal?)

Why, in effect, cut off viral marketing by limiting password sharing without also introducing a way for subscribers to forward a one-time-use link that expires after a single use. Limit such sharing to once or twice per month. Internet technologies can be used to detect and prevent an attempted second use – and reveal where the second use was attempted.

Piracy Monitor ends up being puzzled by the trend that major producers like Disney and MAX, emphasizing a defensive posture rather than going on the offense.

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