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The War That is No More - Netflix Vs. VPN's

Dianna Labrien
11.03.16
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WhenNetflix raised its subscription rates in the U.S., there was a loud outcry and a prophecy that the provider would lose subscribers "left and right." Actually, that has not happened. In fact, in the past quarter alone, the video provider has added 370,000 new subscribers in just the U.S. Around the world, 3.2 million new subscribers have been won, as Netflix has now expanded globally.

So, what is this talk about a "war" between Netflix and VPN's? Yes, there has been a "war," but it is largely over. Understanding this will require a short but recent history lesson.

Netflix Has a History of Flexibility

Since its beginning, Netflix has claimed and, in fact, followed through on its very liberal policy that, when one person subscribes, they can pass their login information off to family and friends to use too. Indeed, it even encouraged its subscribers to do this.

And for years, people all over the world, where Netflix did not operate, used virtual private network services to fake their geographic locales, to access Netflix content, through it was region-locked and not available in their countries. The response of Netflix was to privately ignore this activity.

Fast-forward to today. Netflix continues to allow subscribers to share their logins with family and friends. And to encourage it even more, it has now established a feature in a subscriber's profile that will keep his viewing history/recommendations separate from the activity of others using his login. These shared logins impacted only Netflix, and it has increased the popularity of the company. Ergo, it's continued revenue increases.

Regarding the "region-faking," however, Netflix began to take a different tack. And here's the reason. Netflix coughs up licensing fees by region of the world. And it determines what is available to subscribers in each region. It then pays the owners of that content for the views. When movies licensed in the U.S. are accessed by people using VPN's in other regions, those content owners do not get paid. And they started complaining loudly.

Early this year, content owners finally complained loudly enough to get Netflix's attention. And the company agreed to take steps to block VPN use of its service.

Thus, the War Began

Netflix blocked the VPN's. The problem was that, in the name of privacy and security, lots of individual subscribers actually use VPN's for all of their Internet access. They threatened to cancel their Netflix subscriptions. Add to that the Netflix announcement of a price increase, and everyone expected a large exodus. That exodus didn't occur, but a guerilla war of sorts then began.

Once Netflix began to block VPN's, the VPN's developed ways around those blocks; and of course, Netflix blocked those "way-arounds." This war has continued all year, but VPN services were clearly losing battle after battle. Ultimately, many of them have simply given up and admitted defeat. Three of the biggest VPN services, UFlix, Unblock-Us, and UnoTelly, have stopped publishing any "way-arounds" to the Netflix blocks.

This is not to say that the "war" is over, but it is certainly winding down. And VPN users will either have to pay for video streaming services or find other ways to steal it.

Netflix Also Responded with Expansion

Also at the beginning of this year, Netflix made the decision to launch in almost every country on the planet. This has not meant, however, that it has backed off on its geo-blocking. Not all content is available everywhere, and individuals are still using VPN spoofing to disguise themselves as Americans and access streams which are not shown in their native countries. Netflix has to keep its content providers happy.

As an example of Netflix's reach, once Netflix entered Australia it is pushing out competitors. Many Australians were already signed up with Netflix as U.S. customers through VPN's and are happy to continue to use the service legally. In fact, they can now pay for the service in local currency rather than U.S. dollars, and that is actually cheaper, given exchange fees.

There are still ways around paying for Netflix, but they are becoming far fewer and, in many instances, not fully reliable.

Netflix Still Corners the Market - Push Toward Original Content

Despite all of the events of the past year – the battles with VPN's and the price hikes – Netflix remain hugely popular, and subscriptions keep rolling in. And, because the same content is not available in every country, it does continue its geo-blocking efforts because of licensing agreements with content providers.
One of the things that increases Netflix's popularity is its commissioning of more and more original content. Recent examples are the widely popular Marco Polo, Marvel blockbusters such as Luke Cage, and Stranger Things. And all original content that Netflix produces is available the same day all over the world – Netflix owns international rights to its own content.

A Goal of Half Original Content: Netflix states that its goal is to have a catalogue that is one-half original content. And, indeed, its streaming library is in decline. This does not seem to be impacting its bottom line at all, however.

Netflix subscriptions are up; remaining content providers are happy with the continued geo-blocking; and Netflix has a global presence. The fuss has died out, and the "war" has reached a peaceful resolution.

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