Charter, Disney Execs Pledge To Crack Down On Streaming Password Sharing 'Piracy'

For years now Netflix and HBO CEOs have stated that they see streaming service password sharing as little more than glorified advertising. These execs have long argued that once users realize they enjoy the product, they'll usually sign up for their own account (something particularly true of kids once they leave home and get a job). Even then, these companies already impose a limit on the number of simultaneous streams their services offer, and already charge more for a greater number of streams -- so it's not like these companies are giving away the farm for free anyway.

But for the last several years incumbent broadcast and cable executives have been engaging in breathless hysteria regarding such password sharing. Charter CEO Tom Rutledge has grown increasingly agitated over the practice, arguing that HBO and Netflix's tolerance of password sharing shows a "complete lack of control and understanding in the space," while going so far as to argue that a "lack of control over the content by content companies and authentication processes has reduced the demand for video because you don’t have to pay for it."

Of course you may have noticed that the "demand for video" is higher than ever before, based on Netflix's now 50 million monthly streaming subscribers and the massive rise in all manner of viewing options. And Netflix CEO Reed Hastings (who understands his own business pretty well at this point) has gone so far as to state he "loves" the practice:

"We love people sharing Netflix," CEO Reed Hastings said Wednesday at the Consumer Electronics Show here in Las Vegas. "That's a positive thing, not a negative thing."...A lot of the time, he said, household sharing leads to new customers because kids subscribe on their own as they start to earn income.

Yet some cable and broadcast executives continue their bizarre assault on a problem that isn't. At recent industry events both Rutledge and Disney exec Justin Connolly lamented what they call a rise in password sharing "piracy," hinting that they intend to crack down on the practice in the near future:

"Tom Rutledge has had enough. The chief executive officer of Charter Communications Inc., which sells cable TV under the Spectrum name, is leading an industrywide effort to crack down on password sharing. It’s a growing problem that could cost pay-TV companies millions of subscribers—and billions of dollars in revenue—when they can least afford it.

“There’s lots of extra streams, there’s lots of extra passwords, there’s lots of people who could get free service,” Rutledge said at an industry conference this month...“It’s piracy,” Connolly said. “It’s people consuming something they haven’t paid for. The more the practice is viewed with a shrug, the more it creates a dynamic where people believe it’s acceptable. And it’s not."

You'd think Rutledge, the highest paid executive in America last year, would have a slightly better grasp on the industry he works in and where it's headed. Again, Netflix and HBO impose simultaneous stream limits, so it's not like they're giving away the store. And again, these executives have clearly stated they see password sharing as advertising, so calling it piracy makes no coherent sense. It's a reflection of the hubris often seen in the traditional cable TV sector, where they believe every natural market evolution is an existential threat.

Of course Rutledge is the same CEO that just spearheaded a completely botched merger with Time Warner Cable and Bright House Networks that resulted in higher rates, fewer upgrades, and higher prices. Rutledge's company is also currently being sued for failing to deliver advertised broadband speeds and for using hidden fees to covertly jack up service costs. Disney's ESPN properties, meanwhile, were so blinded by the belief they could nurse the traditional cable cash cow forever, they failed to see the cord cutting trend coming and have lost tens of millions of viewers as a result.

In other words, these two execs have plenty of other problems they need to deal with before focusing all of their ire on a problem that isn't. And when looking for advice on the evolving video market, maybe you should steer clear of folks that pretty clearly have little to no understanding of adaptation or where the market is headed.