(The) effect of password sharing on the profit of OTT firms

Abstract

This paper studies the effect of allowing sharing on the profitability of OTT companies. We establish a simple theoretical model in which firms decide whether to allow password sharing and consumers decide whether to share and how to share. Especially the search cost, which is paid when searching for sharing partners outside households, plays an important role which determines the optimal sharing policy. As a result of the optimization of the model, it is found that allowing account sharing when only sharing between households exists adversely affects the profitability of the company. On the other hand, sharing within a household contributes to enhancing profitability both when sharing between households is possible and when not. This theoretical analysis provides theoretical logic as to why recent OTT companies are trying to prevent sharing between households.