Netflix Will Block VPNs for Now. But Its Real Goal Is Global TV
Netflix wants to make sure you watch TV its way.
The company said in a blog post today that in coming weeks it would begin blocking so-called VPN proxies (VPN is short for “virtual private network”), servers that let users get around content licensing restrictions limiting where movies and shows can be viewed.
“We are making progress in licensing content across the world and, as of last week, now offer the Netflix service in 190 countries,” says David Fullagar, Netflix’s vice president of content delivery architecture, “but we have a ways to go before we can offer people the same films and TV series everywhere.”
For Netflix, this is a bold move. Users around the world have long used VPN proxies to access Netflix when it wasn’t available in their countries at all. And Netflix, it seemed, turned a blind eye in the same way that it does for users sharing account passwords. An executive even denied rumors last January that the company was cracking down on VPN usage.
But now the legit version of Netflix is available pretty much everywhere (except China), and the company is trying to protect its investments, both in content and infrastructure. At the same time, it’s sending a signal to content creators everywhere: we’ll play these geographical games for now. But in the future, TV is going to be global.
The Content Play
Netflix invests heavily in licensing content from networks and studios around the world. Those deals include restrictions that give Netflix the right to stream movies and series only in agreed-upon countries. Netflix’s terms of service explicitly state viewers can only use its service in the country where a user has an account, and that the company will “use technologies to verify your geographic location.”
This is not new. So why is the crackdown happening now? As Netflix chief content officer Ted Sarandos has said, the content distribution market is splintered. Networks and studios have long sold rights to different buyers for broadcasting in different markets. Netflix is trying to change that by buying global content rights.
“If all of our content were globally available, there wouldn’t be a reason for members to use proxies or ‘unblockers’ to fool our systems into thinking they’re in a different country than they’re actually in,” Fullagar says.
For the company, this may be a way to put pressure on content distributors. Want your shows to be streamed There’s a demand for them, and we’ll pay for it, but you have to give us the global rights. By enforcing the content licensors’ rules, Netflix is meanwhile showing a willingness to compromise in the meantime. But the opportunity to reach the global audience Netflix is setting out to command may be too good for studios to pass up. If a worldwide television network exists, and you make TV or movies, wouldn’t you want to be on it?
Meanwhile, in the short term, blocking VPN proxies could very well elevate Netflix’s originals. In certain parts of the world where Netflix is newly available, the company’s third-party content offerings may feel limited. Netflix’s originals, however, are high-quality shows and films that have proven successful around the world already. And since they belong to Netflix, the company can show them wherever it chooses. By blocking users elsewhere from accessing more content available in, say, the US, it can funnel new users towards its originals, which helps build Netflix’s global brand not just as a deliverer of content, but as a maker.
The Long Game
Most of all, however, the move may be a sly way of targeting a much-desired audience in a very special place: China. According to UK research firm GlobalWebIndex, Netflix’s service was accessed by 21.6 million users in China via a VPN proxy in late 2014. (For context, the company has more than 70 million paying subscribers.) If that figure is right, that means there’s a very real demand for the service in China. By restricting VPN access, Netflix may be trying to put pressure on regulators in the country (who themselves are reportedly fans of Netflix originals like House of Cards) to give the Chinese access to its service.
But the crackdown on VPNs may also backfire. Netflix, after all, is a consumer brand, and consumers in, say, the Philippines aren’t going to be happy to learn that they won’t be able to watch the shows and films that were able to view just last month. This ill will might lead fewer consumers to sign up to pay for the service in their home country (especially if the offerings are worse than what a user could have accessed via VPN). The crackdown could also encourage more piracy of both Netflix and Hollywood’s content instead, which is exactly what Netflix should be hoping to avoid.
Netflix, however, is playing the long game. CEO Reed Hastings seems hopeful that one day the content on Netflix will be the same all around the world. That’s the dream. But to get there, the company needs everyone to compromise, at least for now. Building a global television network, it seems, can’t happen with the flick of a switch.