Is Netflix for real with its global crackdown?

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Chris Keall

Netflix' Jessica Jones: fighting crime ... or is it just make-believe?
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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.


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51 Comments & Questions

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Regional rights holders must be pushing down prices from studios and distributors because of Netflix. The argument would be they've paid for regionally exclusive rights that are not exclusive because viewers can get to the same content from Netflix. Meanwhile, Netflix is trying to negotiate world-wide rights. So I would speculate that this is a good-faith move on Netflix's behalf, it shows the studios they are serious about respecting regional rights.
Incidentally, Netflix could always have blocked out-of-region viewers from their content delivery network regardless of viewer's DNS configuration. One can only speculate they've played nicely with the DNS redirection services because of the extra revenue it brings them.

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I'm not sure about extra revenue. It costs the same to subscribe to Netflix whether you're accessing its US, UK, NZ or other country version of the service (roughly, allowing for currency movements).

I guess a New Zealander might say "Stuff this, I'm off to Amazon Prime, Hulu, HBO Now or pirate services" if theu're forced to access only Netflix NZ rather than the much more populated Netflix US. So there's potential to lose revenue.

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Re extra revenue, it is likely the case that people who subscribed to global Netflix did so because of the content range offered, and they would not have otherwise subscribed to the NZ version because of its inferior content range.

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I'm not sure about extra revenue. It costs the same to subscribe to Netflix whether you're accessing its US, UK, NZ or other country version of the service (roughly, allowing for currency movements).

I guess a New Zealander might say "Stuff this, I'm off to Amazon Prime, Hulu, HBO Now or pirate services" if theu're forced to access only Netflix NZ rather than the much more populated Netflix US. So there's potential to lose revenue.

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I am very happy with my Sky upgrade. Sure it looks different, but so what? a few months from now no one will remember the old format. I am less than happy about being offered more of what passes for movies, on Sky, or any other channel, whether on demand or not. Most of them are pure rubbish. Definitely not worth paying for.

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The interface is OK; as you say I'll get used to it. The typeface is nigh on impossible to read without really concentrating but I understand that they are looking at fixing that.

The biggest problem for me is the lag; there really shouldn't be a 1 second plus wait after you have hit a button for something to happen - it makes flicking through channels difficult and it makes using the system hard as you don't know if it didn't get the button press or if it is just lagging. So then you press it again, only for the first press to take effect and then, later, for this one to do something else.

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Mine was very laggy to begin with but I rang up Sky and they talked me through a process of resetting the decoder ( several red button reset and power button in specific order) and now it skips through just as fast as the last software if not faster.

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Why "fix" what wasn't broken? Now it is nigh impossible to read and messy to work with. Who is responsible for this shambolic effort??

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Any respect for peoples IP at the NBR? No lessons from Dotcom?

Any interest in such efficiencies as contracts, agreements, laws etc?

Any future in serious reporting of IP issues?

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Chris clearly gave you a helpful large font headline with PROS and CONS.

Seems reasonably balanced to me .

I believe the answers are (1) yes (2) don't let crown ministers interfere (3) yes and (4) yes

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The interesting thing is how movie and TV series makers (and their distributors) treat their IP. At the moment they're happy to deal with the likes of Sky TV, and the likes of Netflix, Apple, Amazon and others whose geographic blocks are relatively easy to get around. 

I can understand why Sky TV gets grumpy with end-users who use unblockers. But is real beef has to be with the companies that sell it "exclusive" local rights. 

It's important to note that those using unblockers are still paying full commercial subscription fees to Apple, Amazon, Netflix and others (and $5 a month or so to the unblocker on top of that). There's no comparison to Dotcom's Megaupload, which never paid artists or rights holders a cent.

NBR has previous published legal opinions from Baldwins IP specialist Paul Johns, who is of the opinion our pre-internet era Copyright Act (1994) is inconclusive on the matter and needs a test case (unfortunately the Global Mode case -- mismatched from a financial resource point of view -- was settled before it made it to court) and Lowndes Jordan partner Rick Shera, who is confident unblockers are legal. Mr Shera equates them to parallel importing in the physical world, which is well established as legal (and physical parallel importing was of course untouched by the TPP, which in the end turned out to be largely a non-event).

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cf you can eat at my restaurant but only at tables. "No. I want to sit on the floor and use it as a plate and a bin".
NBR: "what does the restauranteur think its doing trying to bring order here"
Toddler: "yeah but we are a new generation and we are going to eat on the floor if we want and if you threaten us we might just pee on it as well."
NBR: handwringing... "threats...blah blah" "Crackdown..." ...liberal meltdown
#windup

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A better analogy is that customers prefer a restaurant with a big menu (Netflix US) to one with a smaller menu (Netflix NZ). My experience is that it's not a particularly generation-bound phenomenon; people of all ages are seeking the content they want, when they want. 

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Its a blatant breach of terms and conditions. its akin to trespass or theft and the notion that you can treat it differently to the breach of real property rights ignores the reality that real hard work goes into either form of property.
Its going to end in tears.

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Is it blatant theft and trespass when - countless times a day - New Zealanders buy physically parallel imported goods? Or when Kiwis use NZ Post's YouShop to buy geo-restricted goods from Amazon's US site?

As with virtual parallel importing, the makers of the goods or services involved get paid either way whether you buy from them direct, through one of their agents in another country or a local distributor.

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So shouldnt the customer leave and eat at the restaurant with the big menu?
Why should they sit in the restaurant with the small menu, order from the large menu and eat the meal while sitting in the small one?
Not a better analogy. The first one was more accurate.

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The problem is sky doesn't own a restaurant.

Nor is my living room their restaurant.

I'm trying to go to the large restaurant

but it's geo blocked

Now if I used Sky's junk box thingie to view netflix content, then I'd be eating my food at the wrong restaurant.

but since sky doesn't own the internet or my computer I dare say I'm no where even near their "restaurant"

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netflix terms:
4.3. You may view a movie or TV show through the Netflix service primarily within the country in which you have established your account and only in geographic locations where we offer our service and have licensed such movie or TV show.

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When I was growing up as a lad in NZ in the 1970s, we had 2 TV channels and you could essentially only buy a TV set that was assembled locally because of import restrictions. They were so expensive and so unreliable that people used to rent Colour TVs and you were happy to pay Tisco to keep the set going. We also missed out on seeing plenty of things we wanted to watch because someone decided that we didn't need to see them or that we only wanted to see the things they were interested in. And you'd have to wait until the programmers decided to screen something and wait patiently whilst making time to watch it when they decided to screen it.

In 2016, big screen TVs are cheap and the consumer has so many choices because there are no restrictions. In terms of content, we are still shackled with this model that still means we have providers who try to dictate when and what content I want to watch. There are plenty of means that I can watch the content I want to, when I want to, quite legally - having an overseas Netflix or iTunes account are examples. The broadcaster still gets paid and so does the content provider and I get the choice to pay for what I want and not a bunch of things I don't need or want. I don't have to rent a piece of kit from the broadcaster and if I don't use the service this month, if I am using iTunes I don't have a fixed charge either.

Some months I spend a lot - some months I don't spend a cent.

So Mike - I don't have to pay monthly for a seat at the restaurant when I might not want to dine there. I have plenty of legal choices to dine when I want to, wherever I want to and I don't have to use the fancy plates at "the restaurant" or adhere to the dress code. I can even choose to dine on an overseas flight if I bring my own plates.

You can try to find ways to stop me dining the way I do but now that I am used to dining whenever I want, paying only for what I want to dine without all of the extras, on any device that I may want to consume my food then believe me when I say to you that I will continue to do it that way.

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errr...its not legal[small voice]

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Reference to actual legislation or it didn't happen.

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in breach of at least s35 Copyright Act 1994(possibly s36-39) with reference to the definition of 'infringing copy' in s12..also
btw a tree does make a sound when it falls over in the forest and no one is there..

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You might be right but there are very good arguments both ways and from what I can tell the courts haven't had a chance to make a ruling to confirm exactly where we stand. It might be against an individual providers' terms of service but that isn't the same as being illegal.

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There is a difference between legal and in breach of terms and conditions.

It is perfectly legal to watch Netflix US from New Zealand using a geo-unlocker. There is no law against it and it isn't a copyright violation. You are effectively parallel importing the service.

It is, however, against Netflix's terms and conditions. Netflix are perfectly within their rights to cancel your subscription and stop you from watching Netflix - or to find some way of blocking the geo-unlocker to force you to only watch your country's service.

Just because you breach a contract doesn't mean you are breaking the law.

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the law upholds contracts...

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no, the law upholds the parties' rights in contract; but it's up to the parties to claim and enforce them.

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NBR has previous published legal opinions from Baldwins IP specialist Paul Johns, who is of the opinion our pre-internet era Copyright Act (1994) is inconclusive on the matter and needs a test case (unfortunately the Global Mode case -- mismatched from a financial resource point of view -- was settled before it made it to court) and Lowndes Jordan partner Rick Shera, who is confident unblockers are legal. Mr Shera equates them to parallel importing in the physical world, which is well established as legal (and physical parallel importing was of course untouched by the TPP, which in the end turned out to be largely a non-event).

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If I have a valid residential address in say the US with a valid debit/credit card issued in the US that is billed and paid for in the US and I rented or purchased the content on say the US iTunes store that actually went to my PC located there and I synced the content with my iPad how is that not legal or in breach of the terms and conditions?

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Why must the argument always have to be with respect to Sky?
What about Lightbox? Replace your argument with Lightbox and you're saying that its business case has no merits. Without the geographic restrictions on rights it wouldnt and shouldnt exist?

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Netflix NZ (and what it trumpets), is analogous to a diner with high culinary expectations, thinking he's entering a cordon bleu restaurant to find what's top-of-the-menu is Sealord hoki fishcakes and McCain's French fries. He comes away just a tad disappointed.

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And we have a winner in the restaurant metaphor war.

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But wants to pay a courier to bring pan-fried schnapper from the next town over even though another restaurant has exclusive rights to schnapper for that town.
Customers hope that nobody will notice - especially not the restaurant that has those rights. The restaurant critics know whats going on - and talk about it. The competitor complains but other than stopping and searching the courier cant do anything about it.
The schnapper supplier complains vociferously but the restaurant chain is a big buyer of product in the next town over.
The schnapper supplier tries to stop it by searching the courier every so often but the couriers wise up quickly and install hidden compartments in the van to conceal the schnapper.
And life goes on with more and more customers managing to get their cordon-bleu cuisine.

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This is called Parallel Importing. It is specifically allowed under New Zealand law.

Refer to https://en.wikipedia.org/wiki/Parallel_import if you wish to know more. It is common all over the world.

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No. Its not. With physical goods the goods are sold by agreement.
With the use of proxies the content is taken without agreement.

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Now this is just blind insistence in the face of a clear, factual explanation. Content is being paid for, not taken, as already explained.

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Yeah right... and you're guy using the womens toilets who when challenged says "Im transgender..."

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When someone has to resort to comments like this to defend their case. Desperate, much?

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proxy
noun
1. the authority to represent someone else, especially in voting.

A) I tell a friend in another country to buy me a phone then ship it to me. The friend is sort of like a proxy.

B) I go through a proxy on the internet where I connect to an US virtual address and access something else from there.

The website or whatever is acting as my proxy.

Sure there's a agreement, in both cases the content was purchased in their respective countries.

That's why it's by "proxy"

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Physical parallel agreement is often done without the agreement of the brand involved. Witness Adidas' (short-lived) attempts to stop New Zealanders from buying All Blacks jerseys offshore.

By contrast, content makers and streaming services (HBO being a good example of both) have the ability to use low tech methods to crackdown on unblockers -- if they really want to.

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Hey Chris you should steal from old ladies cos they can't fight back.

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Refreshing change from the restaurant metaphors.

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Copyright infringement and paying for services but not conforming with all of their terms and conditions are NOT THEFT. Trying to convolve them with taking things from old ladies demonstrates a fundamental misunderstanding of the situation.

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http://www.odt.co.nz/news/dunedin/172161/adidas-criticised-over-pricing
"Under our cross-border agreement they have the right to ship products within their border but not overseas, and we're certainly taking that very seriously, because we want to support New Zealand retailing," Mr Huggett said.[Adidas]
That wasnt legal. The online seller was in breach of its contract with Adidas.
Adidas got a mauling because it exposed huge price differentials its customers became angry about.
http://www.smh.com.au/rugby-union/union-news/adidas-apologises-over-all-...
My point is you can't rely on the Adidas case in support of some irrational notion that the law upholds blatant breach of contract.
Because if it does you might as well start your timer because your lifestyle will go on the same chopping block in due course because we rely on the efficiencies generated by those laws to support the whopping leverages we employ to deliver even our most basic life elements.
If you want to play with chainsaws while stand on branches its best to cut outside and above your legs. Some people here might need to realise you don't actually cut your legs - you cut the tree.

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Not actually the case. Speaking as someone whose job used to be, essentially, scouring the world for parallel imports, most parallel importing is done via intermediaries.
Typically, middleman buys product from manufacturer, and manufacturer terms almost always state for sale in a particular geography only. Middleman ends up with too much stuff they cant sell, onsells to someone else, or goes bust and a receiver / product broker gets involved, and one of these parties agrees to sell to the parallel importer in NZ. Often the manufacturer then has a witch hunt and if they figure out who it was that onsold, they get cut off. It's exactly the same as parelel importing media content (this story) as it is parallel importing Levi's or Adidas.

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No its not because in the case of consumer goods there is no agreement between the purchaser who buys those goods from the parallel importer and the manufacturer.
In the case of Netflix there is an agreement between the end viewer and Netflix which the enduser is in breach of if it is accessing the content primarily from another jurisdiction via a proxy.

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"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."

I find this a little perplexing because when my VPN was playing up one night I got a notification from Netflix saying, 'We notice your country is changing often, is everything ok?'

That would suggest Netflix can easily tell who is using a VPN with account information.

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They didn't necessarily identify that you were using a VPN. (Maybe, maybe not.)

They knew where your connection appeared to be coming from, but it seems like what triggered their system was your network address changing in an unexpected way - too quickly to be caused by travel, for example. If your VPN hadn't been broken that wouldn't have happened and they would have been none the wiser.

They do of course know what your IP address was (or what it appeared to be) and they might be putting together (or purchasing) a list of known VPN termination point IP addresses which they'll be able to check you against.

My hunch is that this is most likely what they're planning.

Who knows how serious it will be to get that flag on your account, might be instant termination - which would be a harsh way to treat paying customers. Much better to make those customers choose between closing their account or moving their subscription to their home country - a terrible choice to have to make when so many countries have such dire Netflix offerings.

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For entertainment starved New Zealanders, the options are either to 1. VPN 2. Pirate or 3. Pay the ransom that Sky dares to call a subscription price.

IMO, Netflix/Apple TV for movies/TV, and a pub for sports is way better value.

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4. Restraint with respect.

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The food analogies are terrible...if you want to use food, isn't it more like a fish and chip (F&C) takeaway shop having an agreement with the fish supplier that it is the only F&C shop that can sell snapper in a particular neighborhood (ignoring that there are multiple suppliers of snapper....humor me and assume there is a snapper monopoly)

Say that my local F&C shop is actually really bad, so I drive the next suburb over to a F&C shop that has much better quality and get my dinner there. The local F&C owner then gets pissed off because it has the exclusive right to sell snapper in my neighborhood but I am buying snapper elsewhere.

The fisherman still gets paid for the snapper and the local F&C guy is annoyed that he paid for an exclusive right that can be arbitraged.

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Right now, Netflix authorizes people to "travel" to another country with their subscription.

That means that someone with a NZ account going to the US (physically), will have access to US content on their NZ account while there. Using a VPN or smart DNS, people trick Netflix servers into thinking they're in the US (digitally), and access US content.

It should be pretty easy for Netflix to change that policy, banning travel, and to only allow account holders to access content from their home-country account, no matter where they are (physically OR digitally).

That wouldn't prevent Kiwis to sign up for a Netflix US account and access US content, but it would prevent them from switching countries all the time without creating separate accounts and being billed accordingly...

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