Netflix Pricing Determined By Piracy Levels?

In the big battle over entertainment piracy around the world, the staunch reaction of studios and networks has been to decry the practice and/or actively campaign for legislation against it – something they’ve recently had success doing in Australia.

A new report on TorrentFreak however says that one company is using piracy to its advantage – Netflix. The streaming company has been going global in recent years and in the process has visibly pushed down piracy in countries where illegal sharing is prevalent.

One of the big ways it’s doing that? The main factor in determining the price of its service in different countries is NOT based on local competitor pricing but rather on local piracy rates. It also uses local piracy statistics to determine what content it should offer in various regions, in the process allowing it to better compete in places where piracy is rampant.

Netflix’s Chief Financial Officer David Wells says: “Piracy is a governor in terms of our price in high piracy markets outside the US. We wouldn’t want to come out with a high price because there’s a lot of piracy, so we have to compete with that.”

A far less urgent issue is that of VPN usage – people who have Netflix accounts using legal VPNs to get around geoblocks and access content on the service only available in other countries.

Netflix CEO Reed Hastings says that while it’s not something the company encourages, it’s “certainly less bad than piracy” as it is used by paying customers. The situation he also labels as “kind of a whack a mole” in terms of being able to stop the practice.

Netflix head of content Ted Sarandos also prefers to focus on the piracy issue: “The real great news is that in the piracy capitals of the world Netflix is winning. We’re pushing down piracy in those markets by getting access. “The best way to make the VPN issue a complete non issue is through global licensing that we’re continuing to pursue with our partners.”