When Netflix recently expanded into 190 different countries, we noted that the company ramped up
its efforts to block customers that use VPNs to watch geo-restricted content. More accurately, Netflix stepped up its efforts to give the illusion
it seriously cracks down on VPN users, since the company has basically admitted
that trying to block such users is largely impossible since they can just rotate IP addresses and use other tricks to avoid blacklists. And indeed, that's just what most VPN providers did, updating their services so they still work
despite the Netflix crackdown.
Netflix's frankly over-stated "crackdown" is an effort to soothe international broadcasters, justly worried about licensing content to a company that is demolishing decades-old broadcasting power centers. But even superficial as it may be, Netflix's crackdown on VPNs still managed to erode user privacy
and security, since obviously there are countless people using VPNs for reasons other than engaging in global Netflix tourism
With that in mind, Netflix CEO Reed Hastings probably didn't win any new friends this week when stated on the company's latest earnings call that VPN users are loud but, ultimately, "inconsequential"
There was uproar from customers, some of which simply use VPNs to protect their privacy, with a petition calling for the ban to be lifted attracting over 40,000 signatures. But it seems Netflix, which generally cherishes its user experience, doesn’t seem fussed by this uprising.
“It’s a very small but quite vocal minority,” CEO Reed Hastings said during this week’s earnings call. “So it’s really inconsequential to us, as you could see in the Q1 results.”
And, if looking solely at growth, he's not wrong; the company reported that it now serves 81.5 million members, 42% of whom are now outside of the United States. That's 44,740,000 TV subscribers in the States alone, double Comcast's latest tally of 22,347,000 TV customers. While investors are worried about growing competition from Amazon and grandfathered customers' reaction to next-month's price hike (actually announced two years ago
), most customers, VPN or otherwise, aren't leaving.
And while Netflix may be annoying some VPN users now, the company has repeatedly stated that its ultimate goal is to eliminate geographic broadcast restrictions entirely. That not only makes it so Netflix tourism is unnecessary, but it should reduce piracy -- something Netflix Chief Product Officer Neil Hunt reiterated earlier this year at CES:
“Our ambition is to do global licensing and global originals, so that over maybe the next five, 10, 20 years, it’ll become more and more similar until it’s not different”... “We don’t buy only for Canada; we’re looking… for all territories; buying a singular territory is not very interesting any more.... When we have global rights, there’s a significant reduction in piracy pressure on that content. If a major title goes out in the U.S. but not in Europe, it’s definitely pirated in Europe, much more than it is if it’s released simultaneously,” Mr. Hunt says.
In other words Netflix's long-term vision may be to eliminate fractured broadcast licensing so users don't need to use VPNs. But in the short term Netflix should probably try a little
harder to avoid alienating its more technically savvy customers. They may be "inconsequential" now during Netflix's heyday, but may prove important once Netflix's streaming battle against Amazon, Hulu, Apple, and countless other companies starts to heat up.