According to a study by research firm Parks Associates, password-sharing is set to cost the streaming industry more than $500 million worldwide this year. The survey found that 6% of American households use a borrowed streaming service, such as Netflix (NASDAQ:NFLX), Hulu, or HBO. For the most part, Netflix has operated with a hands-off attitude toward password-sharing, and it's easy to see why: it's in the company's interest to make usage as easy as possible as long as subscriptions are growing.
A 2013 study, however, found that significant numbers of Netflix and HBO freeloaders would pay for the services if they were forced to. 41% of HBO borrowers and 33% of Netflix ones said they would be willing to pay for the services within the next six months if they had to.
Netflix CEO Reed Hastings has suggested several times that password sharing is not a threat to the company, and that the numbers are insignificant. If Parks Associates' research is correct, that would indicate that about 2 million domestic households would pay for Netflix if password-sharing were cut off. While that would add about $200 million in revenue to the company's coffers, it's probably not worth it. Considering Netflix has over 40 million domestic subscribers already, 2 million would represent less than a 5% increase, and Netflix is already adding more than 5 million domestic subscribers a year anyway. Perhaps most importantly, cracking down on password sharing would mean making the user experience less convenient in one way or another. Netflix would either have to add another level of user verification beyond a simple password, or limit the number of screens the account can be used on.
From the article "Amazon Prime Is Cutting Off Freeloaders. Could Netflix Inc Be Next?" by Jeremy Bowman.
