Is Netflix for real with its global crackdown?

LATEST: Netflix crackdown goes off the rails

Netflix has promised a crackdown on proxies, VPNs and other low-cost "unblocker" services people use to access video content usually blocked to their country. For example, to access Netflix US, which has roughly eight times the content of Netflix NZ. Over the coming weeks, users of unblockers will be bumped to their own country's version of Netflix.

Such a crackdown would be a fillup for Sky TV, which needs one following the stormy reception for its crucial $120 million project to add on-demand capability to all decoders (and of course to Spark's Lightbox, Quickflix, Freeview Plus and TVNZ and MediaWorks on-demand efforts).

Yet we've been here before. Barely a month has gone by over the past couple of years without a site like TorrentFreak reporting Netflix is on the cusp of a crackdown.

Certainly, Sky isn't popping the champagne corks yet. 

"All will be revealed in the 'coming weeks' I guess. It will become apparent to all if unblocking is still possible or not," comms director Kirsty Way told NBR on Friday.

So is the threat for real this time? The pro and con arguments:

PRO

1. This time it's not a an anonymous insider who's tipping a crackdown; it's straight from the horse's mouth -- or at least the mouth of one David Fullagar Vice President of Content Delivery Architecture at Netflix, who wrote in a January 14 post:

Some members use proxies or “unblockers” to access titles available outside their territory. To address this, we employ the same or similar measures other firms do. This technology continues to evolve and we are evolving with it. That means in coming weeks, those using proxies and unblockers will only be able to access the service in the country where they currently are. 

2. Netflix recently went global, launching in a swathe of new territories to take its total footprint to 190 countries. But offering service in nearly every country in the world is not the same as being a single global channel, as its Netflix' ambition. Netflix US and Netflix UK have full-blooded offerings. Netflix in Australia, NZ and other countries can look a little starved for content by comparison (Netflix ongoing effort to create more and more original series notwithstanding). Actively enforcing its terms and conditions, including territory restrictions on content, will help Netflix negotiate more country-by-country deals while it patiently builds the customer base it needs to make global bids for content some time in the future.

CON

1. Netflix is just posturing, saying the words rights-holders want to hear. A few weeks later it will be like "Well, we gave it the college try but it just didn't pan out."

2. There's not really anything Netflix can do, on a technical level, to weed out those using proxies. That's not my theory; that comes from Netflix chief product officer Neil Hunt, who told NBR as his company's service launched in NZ: "There's not a lot we can do to stop some accessing the US. We don't intend to do anything differently. There's not much we can do." Against this, Mr Fullagar's post mentions "evolving" technology to combat region blockers. But it remains a tricky one on a number of levels. VPNs (virtual private networks) are one way of getting around region blocking, but as Lightbox's CEO has noted, there are many legitimate uses for VPNs too, making any crackdown problematic. It's worth noting that an aggressive crackdown by HBO last year for its HBO Now service seemed to be based on a the relatively low-tech technique of filtering for subscribers who had submitted an address outside the US, then putting the onus on them, through a warning email, to prove they lived in the US or face being cut-off within days. HBO's effort remains the only front-font initiative by any streaming video-on demand service to weed out unblockers. Yet today, it's pretty straightforward for Kiwis to access the service.

3. There's no financial upside for Netflix. Those using unblockers are paying the same as everyone else. There is a financial downside: alientating subscribers who use unblockers (see point 4). And then there's the dirty little secret that while local rights holders like Sky TV hate unblockers, they don't cause content makers any financial harm; in fact they can double dip, selling local "exclusive" rights to the likes of Sky, then also taking a slice of the action as New Zealanders seek content from offshore services.

4. (And I think this is the strongest 'con' argument.) Netflix isn't the only streaming video on-demand outfit with global ambitions. It's widely expected that Amazon will make a worldwide push for its Prime service when its Top Gear clone fronted by Jeremy Clarkson launches later this year. Regardless, Netflix will be away that a lot of people outside the US (including Kiwis) are already using unblockers to access Prime. Netflix will also be wary Google's nascent attempts to use YouTube and Play for on-demand commercial content, and the global threat posed by Apple's a la cart iTunes service (which outside of its thin NZ offering, has a lot of hot TV shows). Other offerings abound, from Hulu (offering current US shows) to the growing threat from direct apps from Showtime and HBO's HBO Now, which parent company Time Warner intends to spread around the planet. Netflix will also be aware that illegitimate content downloads are on the rise, and that some who perceive the company is supporting old-world regional monopolies on content will simply shrug their shoulders and turn back to out-and-out piracy.  With the global land grab in full-swing, will Netflix want to alienate the large slice of its paying audience who use unblockers?

* My two cents on that fiasco: gremlins are inevitable with any large software upgrade, as are user grumbles about any change. The two questions for Sky shareholders: 1. Will a bug fix promised by Sky blow out the $120 million budget? and 2. Why didn't Sky get its on-demand upgrade out of the way two years ago, ahead of the inevitable arrival of Netflix in NZ? 

If you're travelling by Air New Zealand, remember Koru Lounge wi-fi provides you with FREE access to NBR ONLINE premium content.