Netflix and Piracy: How the Two Interact

Source: Thinkstock

Source: Thinkstock

A recent letter from Netflix pointed to popular pirating services like Popcorn Time as a serious competitor to the company’s streaming business, touching on discussions of the complicated relationship between Netflix and piracy. In a January letter to shareholders (PDF), Netflix noted that “Piracy continues to be one of our biggest competitors,” pointing readers to a Google Trends page comparing searches for “Netflix,” “HBO,” and “Popcorn Time” in the Netherlands from January 2014 to January 2015.

One graph shows the popularity of “Popcorn Time” as a search time rising dramatically over the past six months, to the point that it’s on par with Netflix and significantly above HBO in popularity. (However, both worldwide and in the United States, the popularity of the search term “Netflix” remains safely and significantly higher than either Popcorn Time or HBO.) But Netflix’s executives refer to the Netherlands graph as “sobering,” pointing to the company’s worries over the complicated relationship between Netflix and piracy.

As BGR notes, movie pirating used to happen behind closed doors in quiet corners of the Internet. Users would go to peer-to-peer file sharing services to download copies of films, and would often try to cover their tracks. By contrast, Internet users today discuss movie theft openly on Reddit and other forums, and popularly download stolen movies from widely publicized services like Popcorn Time, and Netflix, the biggest streaming movie and TV service in the world, has taken notice.

Popcorn Time, with software available for every major computer and smartphone operating system, makes piracy easy. In fact, the service makes it just as easy to pirate a movie as it is to stream one on Netflix. It gives users an easy (and visually appealing) way to download torrents, and is available via a free download, making all of the pirated content accessible through the free service. Popcorn Time succeeds by making torrenting more accessible than it’s traditionally been, and is simply the latest — and most popular — in a series of sites that help consumers to download or stream illegally pirated content.

As Bloomberg Businessweek reports, free networks that are “too good to be legal” can quickly expand globally. The Napster revolution started on college campuses, and Pirate Bay — raided by police last month — began as a Swedish export. The United States is Popcorn Time’s biggest market, with 1.4 million downloads as of September, according to TorrentFreak. The Netherlands, for the record, is the second-largest market for the app with 1.3 million downloads. Bloomberg Businessweek notes that Netflix has been making the argument that piracy is one of its biggest competitors since at least 2005, when Netflix’s main business was shipping DVDs through the mail. As the legal options are improving, so are the illicit ones.

In May of 2013, Netflix’s Ted Sarandos gave an interview with Stuff magazine, in which he sounded optimistic about Internet piracy. (A Huffington Post headline at the time even claimed that “Netflix Isn’t Worried About Internet Piracy.”) When asked what Netflix is doing to combat piracy, Sarandos noted that Netflix was driving it down:

One of the things is we get ISPs to publicise their connection speeds – and when we launch in a territory the Bittorrent traffic drops as the Netflix traffic grows. So I think people do want a great experience and they want access – people are mostly honest. The best way to combat piracy isn’t legislatively or criminally but by giving good options. One of the side effects of growth of content is an expectation to have access to it. You can’t use the internet as a marketing vehicle and then not as a delivery vehicle.

 

Also in 2013, Variety reported that Netflix investigates what’s popular on piracy sites. Netflix executive Kelly Merryman noted that in addition to considering what’s popular among TV viewers in a given country, “when purchasing series, we look at what does well on piracy sites.” Netflix execs have repeatedly claimed that piracy rates decline in countries after it launches, with chief executive Reed Hastings noting that BitTorrent usage in Canada dropped 50% following the service’s launch there. Hastings reported in an interview, “Netflix is so much easier than torrenting. You don’t have to deal with files, you don’t have to download them and move them around. You just click and watch.”

Farhad Manjoo, writing for Slate in 2011, noted that Netflix was “killing piracy” with its recently improved selection and accessibility. At the time, Sandvine had just reported that Netflix had overtaken BitTorrent in bandwidth. Netflix accounted for 22% of all U.S. broadband traffic, compared to BitTorrent’s 21.6% share, and at peak times hit 30% of all traffic. (More recent Sandvine data shows that filesharing traffic continues to decline globally in almost all regions, except Asia, and Netflix continues to dominate North American networks, accounting for 34.9% of downstream traffic in peak evening hours.) At the time, piracy looked like it was on the decline, and streaming services were both adding more content and making streaming more convenient than torrenting.

But years later, users still can’t go to a service like Netflix and find everything they could possibly want to watch for a low monthly fee. So they continue to use sites like Popcorn Time. As TechCrunch noted in 2014, Popcorn Time is the easiest way to pirate movies yet. Popcorn Time exemplifies the way that consumers want to consume media. While Netflix, Amazon, and others are working to bring the same sort of experience to the masses, and their growth numbers show consumers are getting on board, Hollywood is still keeping some of its best content away from legitimate streaming services. As long as platforms like Netflix are missing some of the content that users demand, the pirating industry will continue to thrive.

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