Disney is the latest streaming giant to jump into a password-sharing crackdown, with its efforts to make money from the effort set to begin in earnest this summer.The media giant has already updated its subscriber agreement for Disney+, as well as Hulu, to ban account sharing for new subscribers starting Jan. 25, and for existing subscribers starting March 14.On the company’s Feb. 7 earnings call, Disney CFO Hugh Johnston said that starting this summer, Disney+ account holders will be “presented with new capabilities” that allow account-sharers to start their own subscriptions. Later this calendar year, account holders can allow individuals outside of their household to access their account for an additional fee.“While we’re still in the early days, and 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 with our outstanding content and we’re looking forward to rolling out this new functionality to improve the overall customer experience and grow our subscriber base,” Johnston said.The paid-sharing initiatives follow in the footsteps of streaming competitor Netflix, which began its password crackdown in the U.S. in May of last year after initiating the program in several countries around the world in early February. In the second quarter of that year, Netflix reported adding 5.9 million new subscribers and said it had seen a limited number of account cancellations.In its most recent earnings, Netflix continued on that momentum and reported adding 13 million subscribers, to reach 260 million, marking its second-best quarter ever for subscriber signups.Netflix, which also has an option for the account holder to pay to add a member outside the home or for the borrower to transfer their profile and create their own account, saw fourth-quarter revenue up 12 percent year-over-year, which it credited to paid sharing, as well as price increases and the underlying business. “We largely put price increases on hold while we were rolling out the paid sharing work because we saw that as a form of substitute price increase,” co-CEO Greg Peters told analysts on a Jan. 23 earnings call. “Now that we’re through that, we’re able to resume our sort of standard approach towards price increases.”While Disney has a much smaller subscriber base, with 111.3 million core Disney+ subscribers and 49.7 million at Hulu, Johnston said the company had a “rough estimate” of the potential borrowers out there and how it may contribute to their bottom line.“Suffice to say that the opportunity that we see on a percentage basis probably isn’t all that dramatically different from what our competitor has found in terms of their subscriber base,” Johnston said.Other media companies with streaming services, such as Amazon and Apple, have not cracked down on password sharing yet — though neither streaming nor entertainment is the main focus of these companies and they don’t need to use streaming to balance out cord-cutting losses.Among the other holdouts, Warner Bros. Discovery has yet to introduce a password sharing crackdown for Max. However, the streaming service, which combines Discovery+ content with HBO Max, only launched in May and until recently, management had been more concerned with the launch, in addition to paying down debt at the company. The company has also been licensing its content to rival platforms in an effort to bolster its finances.“We continue to be very pleased with the strong foundation that JB, Casey and the team have put in place to first stabilize and now grow the business,” Warner Bros. Discovery CEO David Zaslav said on the company’s Nov. 8 earnings call.The account-sharing crackdown is one of several measures Disney plans to introduce to help it reach streaming profitability by its fiscal fourth quarter. In its first-quarter earnings report, core Disney+ subscriber numbers fell by 1.3 million, which the company attributed to price increases in the quarter. However, the company said it expects to add 5.5 million to 6 million next quarter, thanks, in part, to the addition of select Charter subscribers. And average revenue per user increased from the previous quarter, thanks to Disney’s burgeoning advertising tier, which recently expanded outside of the U.S.In addition to paid sharing, Johnston said Disney has a plan to reach longer-term double-digit margins on streaming, through measures that include its bundles, such as making Hulu content available on Disney+ for certain subscribers, which should help lower churn amid the password-sharing crackdown. Johnston also said Disney still sees a “growth opportunity” in its international markets.Jessica Reif Ehrlich, a Bank of America analyst, pointed to these measures, in addition to the expectation of further subscriber additions and continued cost savings across the business, as a sign that Disney is on the right track.“While several big picture questions remain, we are incredibly encouraged by DIS’ progress on several strategic and financial initiatives which are reflected in FY1Q,” Reif Ehrlich wrote in a Feb. 8 note.
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