Netflix and Globalisation
A recap on the blog series
The main reason for selecting Netflix for this project as I wanted to understand better why they had decided to ban VPNs and the effect it would have on their business. As I have researched and delved into the company and market, I have realised that I was naïve in my approach. Pretty much the internet is the only place I will be able to watch what I want and when I want it… Moreover, this may not always be respecting the copyright on content.
With globalisation and the power of the internet, if there is a delay in the content being available typically it can be located on a BitTorrent file sharing website.
As defined by Wikipedia
“BitTorrent is a communications protocol of peer-to-peer file sharing (“P2P”) which is used to distribute data and electronic files over the Internet. BitTorrent is one of the most common protocols for transferring large files, such as digital video files containing TV shows or video clips or digital audio files containing songs. Peer-to-peer networks have been estimated to collectively account for approximately 43% to 70% of all Internet traffic (depending on location) as of February 2009.[1] In November 2004, BitTorrent was responsible for 25% of all Internet traffic.[2] As of February 2013, BitTorrent was responsible for 3.35% of all worldwide bandwidth, more than half of the 6% of total bandwidth dedicated to file sharing.[3]”
https://en.wikipedia.org/wiki/BitTorrent
BitTorrent sites can be banned by some ISPs and others will shape the traffic. The ISP’s are sight the copyright issues and therefore this prohibition or traffic shaping is not considered to be part of the Net Neutrality debate.
For example, I have a friend that is crazy for “Big Bang Theory,” he was aware when the new episodes are aired in the USA which was last week. Unable to wait, the day after it aired my friend sourced the new episode from a Bit Torrent file sharing website. Typically episodes are available online within 24 hours of being aired. If you ask people around torrenting, they tend not to feel bad as they would have been respectful of the ownership rights if they had the ability to view it at the same times as the American public.
In the last decade, Television channels in NZ would delay showing the latest shows from the USA. With more people going online for content (legal or not), the television channels has to adjust or drastically reduce the delay otherwise. In fact, the same day as the USA has become part of the advertising of the latest and greatest shows. I was surprised when HBO aired the “Game of Thrones” season at the same time as the USA. While I did not take half a day each week to watch it at 1 pm, it was great to know it was waiting on the MySky when we returned home each Tuesday evening.
A high-level view of the globalisation issues Netflix have encountered
New Zealand GST Tax
The Tax issue appeared to be a storm in a teacup. While Spark was in the media saying Netflix had an unfair advantage against the GST chargeable Lightbox service. When looking at this closer, this was literately an issue with the NZ tax law and not some big bad USA company out to get an advantage. With the introduction of “Netflix tax” in October, Netflix will start to pay GST on the monthly subscription but have not raised the subscription costs. I do wonder if other online services that will now have to pay GST will increase pricing or their current pricing is considered EX-GST. Also not sure that the GST increase would be enough to have subscribers leave the service.
Ban on VPNs
It was standard practice in NZ, to have a Netflix subscription and use a VPN to access the USA content. In January 2016, Netflix announced they would be taking measures to block customers that were connecting to the service via VPN. To say people outside of the USA did not take it well was an understatement, even though the announcement coincided with Netflix becoming available in 130 additional countries including New Zealand. The ban was certainly an unusual move to stop their paying clients from using their service, and many feared tNetflix would be losing customers from this change. The reality is that subscribers were only prevented from viewing content that was only licensed for Netflix to stream in the USA.
With this ban on VPN, I think there are two different parties we need to consider: Netflix and USA Only Licence owners.
More than six months after the ban of subscribers using VPNs there have been little evident to suggest the service has lost clients or market share, infamously stating “So it is really inconsequential to us.”
Whereas one would have to question the impact on the Content Licence holders that only provided Netflix with rights for the USA. Sure in some cases the rights within new Zealand may have been granted to another service, the most likely scenario is this content is being sourced via unlicensed platforms like a BitTorrent site and or that the consumer has lost interest in the content as it is now unavailable.
Within time I see that the affected content licence holders will need to either grant Netflix worldwide rights or manage each country individually. The content will be a need to be made available in some form, or it will no longer be an asset for the digital content licence holders.
In reflection, while the ban on VPN was reported as being a bad business decision for Netflix, the reality is that this was a sound business decision and has forced the issue of global digital content licencing rights. With Netflix continual investment in their unique content, they are no longer relying on other providers and are starting to the set the rule in a world where most of the digital content today is delivered by devices other than the TVs in the living room.
Thanks for following this blog series
References
https://www.wired.com/2016/01/netflixs-vpn-ban-isnt-good-for-anyone-especially-netflix/
