LOS ANGELES—A court ruling last week now means that the act of using someone else's password to access an online service—including Netflix or HBO Go—is a violation of federal computer laws. But don't panic: It's not likely that subscription VOD providers will suddenly have the feds descend on people swapping their login credentials.
In a July 5 ruling in a case about a former employee at executive-search firm Korn Ferry, a three-judge panel of U.S. Court of Appeals for the 9th Circuit found that sharing passwords without the authorization of the system's owner is a crime that can be prosecuted under the U.S. Computer Fraud and Abuse Act. That would potentially make millions of Americans "unwitting federal criminals," according to a dissenting opinion by Judge Stephen Reinhardt as noted by Fortune.
"The majority is wrong to conclude that a person necessarily accesses a computer account 'without authorization' if he does so without the permission of the system owner," Reinhardt wrote in his dissent. He cited examples where the ruling would make it illegal to engage in some common examples of password-sharing, such as logging in to a Facebook account on behalf of a friend or relative.
The trend of people freeloading off the Netflix or HBO passwords of paying subs has long been a question facing the industry, and during the Primetime Emmy Awards last year host Andy Samberg even made a joke about it. A study last year by research firm Parks Associates suggested SVOD services would stand to lose upwards of $500 million in revenue in 2015 from the practice.
But Netflix, HBO and others have downplayed the impact of password sharing on their businesses. Indeed, Netflix CEO Reed Hastings said in January at the 2016 International CES that the phenomenon has not really been a significant problem, and that people who are piggybacking an another member's account often end up later becoming paying customers. "We love people sharing Netflix whether they're two people on a couch or 10 people on a couch," Hastings said, per TechCrunch. "That's a positive thing, not a negative thing."
And other research suggests password sharing of SVOD is not at epidemic levels. A little over 4% of subscribers said they share their password outside their family circle, while 42% say they share it with family members, according to a survey of 1,007 U.S. adults conducted in April by IBM Cloud Video's Clearleap division. About half of millennials said they have used someone else's password to try an SVOD service like Netflix, according to the IBM survey; however, once they subscribe, they are no more likely to share their own password outside the family circle than anyone else.