Media analyst sounds alarm on password sharing after ESPN streaming launch

We’re nearly one week into the full launch of ESPN’s long-awaited direct-to-consumer streaming service, and the rollout has been far from smooth.

Despite marketing efforts that would suggest otherwise, ESPN’s new streaming app isn’t available to everyone. Customers that subscribe to Comcast or YouTube TV in order to access ESPN still do not have access to all of the bells and whistles available in the app. And those are just the two largest distributors of the many that have yet to renew deals with ESPN’s parent company, Disney.

That issue will come to a head next month, when ESPN airs its first WWE Premium Live Event, a broadcast that will be exclusive to the new app. Should Disney fail to reach agreements with the numerous distributors still without full access to the app, those customers will be forced to shell out $30 per month to watch that WWE programming.

It’s quite the blunder after having promised those that access ESPN through traditional means full access to the app as well. And it’s just that type of frustration that could lead consumers to find alternate means of accessing the content they want. And perhaps the most common workaround in these types of scenarios is password sharing.

A person already paying for ESPN through a traditional bundle is almost certainly not going to pay $30 on top of that just to get programming they were already promised at no additional cost. So what are they to do? Find a friend with access willing to share a password, of course.

This is precisely the fear of analysts observing the transition of premium live content (like sports) from the traditional cable bundle to streaming apps.

Last week, ESPN and Fox — the final two holdouts keeping their premium inventory within the bundle — finally took their content and put it on a streaming service. That’s great for fans who have cut the cord and want to mix-and-match streaming services. But it’s concerning for these businesses, which fear that the move to streaming will make piracy via password sharing easier than ever before.

Michael Nathanson, founding partner of the media research firm MoffettNathanson, recently sounded the alarm on password sharing during an appearance on the Sports Media with Richard Deitsch podcast.

“What I worry about, Richard, and Netflix did a great job in killing this, is that the password sharing of all these products is really pervasive. …What worries me is that the more and more you improve the authenticated product without clamping down on password sharing, there’s a huge amount of piracy going on broadly in this industry. Netflix has shown us the past couple of years how many people were password sharing, and they clamped down on that above and beyond what we ever thought was possible.

“So, what I think has to happen is, if you make these products available and put all this great sports content in there, which we’ve already viewed as a dangerous thing to do, you better have a plan to start clamping down on password sharing hyper aggressively, right? Because all of the sudden, you give me everything I want on [ESPN’s] flagship [streaming app], and you just make it easy for me [to password share]? People will find a way to get their friend’s and family’s passwords. We’ve seen that time and time again.”

Piracy has largely been an under-covered topic when it comes to the transition from the bundle to streaming. It’s much easier to share a password for an app than it is to authenticate someone else’s pay TV subscription, as most distributors have implemented guardrails to the latter.

And considering that the share of viewers that watch any given programming on streaming is only going to become larger over time, it only makes sense that streaming services like ESPN’s new app, Fox One, Peacock, Paramount+, etc., will need to have a Netflix-like reckoning when it comes to password sharing.

If Nathanson’s worry is to be believed, which it should be, expect that crackdown to happen sooner rather than later.