Netflix CEO Says Annoyed VPN Users Are 'Inconsequential'
from the you-mean-nothing-to-me dept
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.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.
“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 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.
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Filed Under: customers, geo blocking, geo restrictions, reed hastings, security, vpn, vpns
Companies: netflix
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The streaming service Gotham deserves, but not the one it needs right now.
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This line just contributed to the ignorance of the VPN discussion.
There will always be a need to use VPN, and this is the point I wish articles like this would make, rather than the placating the idea VPNs are only used to bypass restrictions.
Because in a perfect world, Netflix should be demanding people be on VPN to access its content rather than kick people out for using VPN.
It's no surprise companies are moving toward blocking VPN users. How else are they going to abuse your privacy if they don't know who you are.
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And before Geo restrictions die there will be the service restrictions (ie: GOT only available through HBO service). We'll need another many years before those restrictions are dealt with and the competition becomes service vs service and content vs content instead of what we have today (copyright vs everybody).
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So much this!
The article's wording is ambiguous. I'm know that Karl wasn't personally arguing that the only reason to use a VPN is to bypass regional blocking, but he was stating that this was the position of Netflix. However, the wording doesn't make that clear.
In any case, a bit of stronger pushback on the assertion would have made that more clear.
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If you do, remember in the last software update Amazon removed the VPN config features from the Fire tablets at the same time as they removed encryption. They have said encryption will return, but so far as I know have not commented on bringing back support for VPNs. (IDK about running Amazon streaming via router VPN, haven't done it).
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I just don't understand the reasons why old tv series need to be removed in the UK but not the US if his idea is for less geo-restriction.
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ISPs .
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Something MUST be done about it!
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Seems he has less control than we imagined.
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They're cracking down on VPNs before Americans start streaming Canadian Netflix for a change.
Because Americans buying services from an international market the way corporations do? That's consequential. And something they want to prevent.
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Basically, what rightsholders are saying is, use VPN and/or pirate if you want to watch those series.
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I doubt it. It would take a significant percentage of those users to suddenly decide they want to use a VPN to watch Netflix (which probably won't happen), or a sudden influx of new subscribers already using VPN connections (not likely either). Competition with Amazon, etc. isn't going to be much of a factor even if they aren't doing the same thing because the number of people savvy enough AND concerned with the NSA or GCHQ knowing they're watching Netflix isn't going to be significant to their bottom line.
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Clearly that sentence was about Netflix's vision on the matter. How clear? It actually includes the words "Netflix's long-term vision may be..." Meanwhile, the entire Techdirt article is about how that is a wrong-headed position.
If you want Karl's clearly stated viewpoint, it is also in the article:
"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."
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Reed Hastings was Correct
Words like "inconsequential" have a specific meaning in a quarterly report call with Wall Street. It ONLY means that it does not have a material effect on the bottom line.
With 44.7 million subscribers, the fact that 40 thousand are upset with a strategic choice (but they're not all quitting) is financially irrelevant.
He's not saying he doesn't care. He's talking about the business numbers, because that is 100% the context of that conference call.
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My understanding is that firms live and die on margins of a few percent these days, certainly in the financial world, they're basically battling over a few percentage points right now.
So perhaps only about 0.1% percent use VPN's, one can easily brush this off as an "inconsequential" number but one could also say that's a substantial percentage of the MARGIN's that companies and finance professionals live and die on. It's funny to see people who worship such small increments in returns fail to recognize the mathematical connection here. You make say 10 changes that affect 0.1% of your customers in a pro-customer way, and you end up with 1% more business... only maybe it's 2% because there is a compounding affect among customers who are likely to leave when their preferences are discounted.
So this seems to me like using a disingenuous, pseudo-mathematical argument to justify the belief that ignoring consumers is something that could be good for Netflix long-term.
It also discounts the idea that some of the ~0.1% who get treated like they don't matter *might* just be disproportionate influencers of other consumers, long-term, for Netflix. Doesn't it make sense that technically savvy users might have such influence now, or at least represent a kind of harbinger?
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Let them eat cake.
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40,000
Question: How many signed a petition supporting it?
Maybe that should tell him something.
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It's not disingenuous. The whole "the customer is always right" motto is largely a farce. The customer isn't always right and sometimes it's cheaper in the long run to say good bye to that customer versus doing everything possible to keep them.
Netflix could choose to ignore VPNs but then the content owners may decide to not sell Netflix their content because of 'piracy'. Not securing a show may have a larger impact on the bottom line and customer satisfaction then blocking VPNs.
You argue against a pseudo-mathematical argument, but your second paragraph is nothing but pseudo-mathematical argument.
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Really, it's not just a proposition that's right or wrong, but is comparable to a dramatic work revolving around "buffoonery and horseplay and typically including crude characterization and ludicrously improbable situations."?
Good thing I didn't make that argument, then.
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In hindsight, I can see how my post was targeted at Karl.
Sorry about that. I generally only target Karl when he's on a rampage to confuse wireless broadband with "unlimited data" because he still believes there's such a thing as "unlimited" ... well, anything, really.
>:]
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The point is, everybody is worse off that way. The viewer doesn't get the product (though they may find another way to watch) and Netflix and the content providers don't get the money. It's a terrible solution, whereas "release everything everywhere at the same time" benefits everyone, and reduces piracy to boot.
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* ass hiding may vary and is dependent on terms and conditions. Ass may not actually be hidden.
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Their selection took a big hit when that deal expired.
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Re: 40,000
Maybe that should tell him something.
The suppliers were the ones signing that one.
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No VPN = No Netflix
- I live in the US.
- I've lived at the same address for over a decade.
- I've been a Netflix customer for over a decade.
- The credit card address I purchased their service on corresponds to that decade old US address.
- Netflix has mailed many hundreds of DVD's to that decade old US address.
I have to call BS in the extreme on Netflix apparently making zero effort to accommodate legitimate VPN usage. I do not believe for a second that they can't validate geo-location by confirmed physical address/account details.
So why didn't they? Whether arrogance, laziness, or collusion in some covert anti-encryption partnership, I don't care. No VPN = No Netflix. Ever.
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As the first reply to your comment indicates, the problem with asking which services works, is that any of us providing you the answer would also be providing Netflix the answer. The same problem exists for the VPN vendors. If they advertise too hard that can bypass, Netflix will specifically target them making their jobs that much more difficult.
I feel your pain though. My VPN service worked for a long time (longer than most) but can no longer connect. This article indicates that certain VPN services are readily able to bypass Netflix's new geo-blocking efforts. From the anecdotal comments in the various VPN forums I read, it's been a bumpy road. While some services are still able to bypass, it doesn't appear to me that it will be a sure thing going forward. At least not sure enough to get me to commit to a year's subscription. Netflix has not just been half-assing their geo-blocking efforts. From what I can tell, they have been very (albeit not entirely) successful and it appears they've been enhancing their algorithms to be even more effective over time. For the VPN's that can still bypass, they have to work much harder to do so.
My plan is to wait it out a while to let the dust settle as I expect a dependable technical workaround will eventually make itself available. I've dropped Netflix in the meantime and am sourcing my content elsewhere.
***Also, as your internet buddy, I feel I must advise you switch VPN services.
Here's why: What Everybody Ought to Know About HideMyAss
Some better alternatives: Which VPN Services Take Your Anonymity Seriously? 2016 Edition
Also, don't have sads because you didn't select the ideal VPN initially. It can be very confusing for mere mortals to know which is best (and even then, you don't know for sure who you can trust). Congratulate yourself for at least being smart enough to use a VPN in the first place. So many stupid sheeple don't even do that much to protect themselves.
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Let's say every person who signed that pledge represents 20% of the group actually upset by the loss of VPN (size would be bigger for the group actually USING VPN). So 40k signatures represents 200K users out of 41.5M. Still seems like a fairly small subset.
But now, let's say that those 200K are influencers for around 20 people each. Suddenly, you're affecting roughly 4M out of 41.5M, or approximately 10% of your userbase.
Is that really inconsequential? Maybe in Nielsen ratings language, but not in reality. Shareholders sure wouldn't want a 10% drop in subscription; neither would employees. You can do a lot less with 10% less revenue. You can also do a lot less with 10% more customer support calls, assuming people already influenced don't leave the service but their influencer is no longer willing to trouble shoot their problems.
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Re: Reed Hastings was Correct
However (from my comment below), I have to call BS in the extreme on Netflix apparently making zero effort to accommodate legitimate VPN usage. I do not believe for a second that they can't validate geo-location by confirmed physical address/account details.
Regardless of how it affects their bottom line, they've basically given a giant middle finger to their obligation as an internet citizen to promote private and secure use of their service by legitimate customers. That's NOT okay.
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And if they average 2 each, that's 400,000 people, or 1%. See, it all depends on what numbers you make up.
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If you don't like what you get, don't subscribe
The entire geolocation 'piracy' issue is venal rubbish. In the era of analog TV and radio, broadcasters did not moan about the fact that waves failed to recognize national borders. When vinyl was king the MPAA did not man border patrols to prevent illicit smuggling of LPs. Amazingly, the entertainment industry seemed to work just as well or better than now, when seeing a current release when it's actually released is considered worse than people trafficking in most of the world.
If Netflix is unable or unwilling to stand up for its customers I feel sorry for it. The usual commercial wisdom is that one visibly unhappy customer equates to about 100 quietly unhappy customers. There are alternatives to Netflix, and market share can erode as quickly as it builds.
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Well, I agree with what you mean here, but there's a much more accurate way to say it: what a business can provide is not always able to meet what the customer demands.
It's not a matter of right or wrong. Netflix deciding to fight VPN usage is not right or wrong, it's a business decision. If a company makes a business decision that you as a customer disagrees with, you complain and try to get the company to change. If the company does not change, you either accept it or stop doing business with them.
Personally, my decision was to cancel my account. It's not a boycott, and I'm not punishing Netflix. I just made a business decision that they no longer offer a service I'm willing to pay for.
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There has to be a better way.
Oh, wait, there is.
If I can't use my VPN for Netflix, then I'll use it for something else.
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The ideal situation, of course, is that VPN use doesn't affect Netflix users at all, but it's only by downplaying its importance that Netflix can reach that point, oddly enough.
Once there's a unified international Netflix library, VPN use stops being an issue. Being from one nation or another doesn't matter at that point, so whether or not the user is on a VPN becomes irrelevant.
Like I said, I totally agree with you that VPN access is important but it might be a battle worth losing now if it brings greater victories later on.
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Thanks again (and to everyone who pointed out HMA's flaws).
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Inconsequential?
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Re: Inconsequential?
Where is that number coming from?
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