Should Sharing Netflix Passwords Be Illegal? (Analysis)

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Tennessee has just passed a law that observers are both hailing and criticizing as a first-of-its-kind measure to criminalize the sharing of passwords on entertainment websites like Netflix, Hulu Plus and Rhapsody. The news got us thinking: What's actually in the law and how will it work?

The state has long made it a crime to steal certain "services" like electricity, water, food and postal mail. The new measure doesn't make any explicit mention of passwords per se, but rather is an amendment to its old theft-of-services law. Under the amendment, "services" now include:

"labor, skill, professional service, transportation, telephone, mail, gas, electricity, steam, water, cable television, entertainment subscription services or other public services, accommodations in hotels, restaurants or elsewhere, admissions to exhibitions, use of vehicles or other movable property, and any other activity or product considered in the ordinary course of business to be a service..."

We've boldfaced the new part, effective July 1st in Tennessee.

It's arguable whether it was really necessary to put "entertainment subscription services" into the statute or whether it was already illegal to steal Netflix, but reportedly the RIAA lobbied hard for these three new words. Why?

According to Mitch Glazier, evp government and industry relations at the RIAA, "While some states may already generally include subscription services in the scope of their theft of services laws, this is the first time a state has reviewed its cable theft law on the books in a forward-thinking manner to assure it is updated to address how entertainment is delivered today."

The Hollywood constituency says the real targets of this measure are professional hackers who share passwords for profit or in bulk, and that casual sharing between friends will likely be overlooked. Of course, that's not what the law says.

Enforcement will depend in large part on what these websites report to authorities. The statute gives individuals who are "directly or indirectly harmed" legal standing to report violations for criminal proceedings.

Will Netflix monitor its site to make sure that a user account isn't being used by multiple parties at once? Maybe, although such behavior is already a violation of a user's terms of service and seems more likely to get a user kicked off the website than prosecuted.

Websites could go after flagrant repeat offenders, but we agree with Miles Feldman, a partner at LA's Raines Feldman, who posits the theory that entertainment companies are prepping themselves for a world where content is increasingly shared on cloud services.

The new law is really intended as a message. Will it work?

"Changing important consumer behavior through criminal or civil law enforcement has not worked well in the past," notes Feldman. "Better for companies to create systems that limit concurrent access and use such legislation sparingly."

E-mail: eriqgardner@yahoo.com

Twitter: @eriqgardner