How Netflix Will Deal With Australian VPN Users

As soon as Netflix announced its plans to launch in Australia in March 2015, I began wondering what would happen to the many Australians who already pay to access the service and use a VPN to work around geoblocking. Would they be forced to migrate to the Australian service, possibly paying more in the process while accessing fewer shows? Now we have extracted some answers from Netflix itself.

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During a briefing on Netflix's Australian launch plans yesterday, I asked Cliff Edwards, Netflix's director of corporate communications and technology, how Netflix intended to handle this situation. He initially tried to divert from the issue by disputing the number of Australians actively involved in using a VPN to access Netflix.

"I would love to see some substantiation behind those numbers," Edwards said. "All I see is a lot of quotation of them with no attribution at all."

Well, let's have some attribution then. The figure of 340,000, which we quoted last month, was calculated by Choice, based on a survey of 1046 Australians, weighted to match census profiles. Analysis of actual payments by Pocketbook also suggests that Netflix was the second most popular paid media service choice for Australians, behind Foxtel but ahead of Quickflix. Clearly, then, there are quite a few Australians doing this.

Edwards' next tactic is to suggest that it's close to impossible for Netflix to identify those customers. "With VPNs, it's very hard to track someone down. We say very clearly that VPNs violate the terms of our service, and we believe that people who license content should get paid for it. If we had content that someone was VPN-ing in and viewing, and we were not getting paid for it, we'd be very upset too. At the end of the day, that's all we can say about that."

I don't think it is all Edwards could say about that — not by a long shot. Netflix could easily identify customers who were paying for the service using an Australian credit card, for instance. Edwards doesn't think that's possible either. "The biggest thing when people are VPN-ing into the US is using 90210 as a postcode and a lot of people do use American Express cards, which don't necessarily have to have an Australian address attached to them."

Hmm, what? I don't doubt that some people sign up with fake details, but if you're properly verifying credit card payments, you should be checking the address properly. And the American Express argument is a furphy — far more people are going to be using a MasterCard or Visa, and it's easy to tell who the originating bank is in those cases.

It seems clear, though, that trying to transfer Australian customers from their VPN-centric US plan to an Australian one isn't going to be a priority. "People get around it," Edwards said. "There may be ways of tracking down people, we do try to track down folks. But, again, it's like a game of whack-a-mole, you just can't find everybody and no company in the world can do that."

But let's assume you can find some of them. There would be two possible motivations for Netflix to pursue customers and ask them to switch. The first would be to make more money — it's generally assumed that the Australian price will be a little higher than the $US7.99 a month paid Stateside for the basic service. But the cost of individually trying to persuade those customers to change plans quite possibly wouldn't be worth it.

The second (and more likely) scenario would be if Netflix came under pressure from other content providers. If Stan or Quickflix or Presto Entertainment had exclusive Australian rights to a show that Netflix offered elsewhere, I'm sure a few shots would be fired in the press by executives from those companies. From that perspective, it's no wonder that Netflix is keen to downplay the notion that Australians are already using the service. It has to be seen as doing the right thing.

The producers of the shows themselves might complain, but that's something of a David-and-Goliath situation. In a world where Netflix is already the dominant provider of streaming media, what independent producer is going to go out of their way to create bad feeling?

Ultimately, it comes down to the eternal capitalist question of how to make as much money as fast as possible. "Even if the number was 200,000, which we don't believe it is, there are still six million broadband households here, and so the vast majority of people are not VPN-ing into Netflix," Edwards concluded. "That's a very large market for us to pursue. Generally, the motivation behind piracy and VPN-ing is that people can't get access to the content. Once people can see they can get access, then even people who are VPN-ing may decide to switch."

It's a fair point. If you're paying for a VPN and Netflix, it's still likely to be cheaper just to pay for Netflix in Australia, even if it costs a couple of dollars more. The performance is also likely to be better, because VPN access to streaming can be variable.

Your main motivation to pay for Netflix US (and a VPN on the side) would be if the content selection on the US service was much broader. Netflix's stated ambition is to offer everything globally where possible, but it has to deal with the reality of streaming rights in Australia often being owned by rivals.

Netflix won't be quoting an exact number of "shows available" or "hours available" for its service, so it's not going to be possible to make an easy comparison. However, once Netflix Australia does launch, I'm sure it won't take long for people to work out where the gaps are. The good news would appear to be that Netflix won't be hassling you in a hurry to switch if you do have an existing account, so you can afford to wait and see before deciding to make the switch.

Indeed, because Netflix automatically switches what's on offer to you if you're travelling, you should be able to check out the Australian offering simply by turning your VPN off. Ultimately, Netflix is unlikely to care — it's still getting your money, after all, whatever the currency.

Lifehacker's weekly Streaming column looks at how technology is keeping us entertained.


Comments

    How about just let people use what they want. If the Aus version is priced accordingly and has all the content I would switch, if not then I'll keep using the US one. And he can bugger off with the 'not getting paid' garbage, I still pay, the studios just don't get there extra high Aus Tax license fee they always demand from Australians.

    Last edited 11/12/14 8:18 am

      This.
      My money still goes to Netflix, which in turn goes to the creators.

        it depends how the content is licensed. Per customer/per view or a fixed fee. It is possible artists could be paid less - although I'd doubt most artists could be paid less after Sony/etc's huge losses eating most of the payments from Netflix (aka creative accounting).

          It doesn't matter how they're getting paid... I'm I paying Netflix the same amount of money that a US resident pays and I have access to the same content they do... Netflix still pays for more content...

      Good article Angus! I like your bases for the numbers. They're extrapolated, so they could be quite a bit lower or higher.
      My guess would be that Netflix Aus will be double the price... 1 To maintain their current profit and 2 to pay Sony for a separate set of customers. Then, you'll have to add GST and exchange variation. I'm guessing about $25 Australian per month approximately (when you round up to the nearest $5).

        No chance. Not with Foxtel basic package being $25.

        Im aiming for $15 a month, top of $20.

      Aus version will most likely have a whole heap of content the US wont, just like the UK. The US will always have more content however. Currently I default to the US, and switch to the UK occasionally. If the AU one has the core programs I watch I'll probably default to AU and switch to US when needed.

      However I doubt I'll pay for AU, not only will US be cheaper, but because I've been a member for so long I'm on grandfathered pricing so am paying less again. I don't feel bad, Netflix isn't ad supported like Hulu, so it's not like someone is paying to pointlessly target an ad to me thinking I live in Oregon. The studio's get their money, they just don't get to rip me off for being Australian.

      Last edited 11/12/14 8:26 am

      Well you'll still need a VPN to access Hulu or even netflix when you're traveling abroad. Let's not forget you may also want to protect yourself from data snooping by the Internet providers.

      We've been using VPNArea (http://vpnarea.com) for so long now, I've grown to appreciate VPNs for more than just Netflix access. It's kind of nice to have the power to switch among 50 countries when you need it.

      I don't know... paying few bucks for a VPN is a small price to pay for a piece of mind in a post-snowden world :-)

    Good. We live in a Global digital economy. The need for distribution rights to digital content is ridiculous. It just adds to the cost, paying another middleman and takes away convenience.
    One Netflix to rule them all, One Netflix to find them,
    One Netflix to bring them all and on the net bind them

    All I can think of is Lenny and Karl saying "shuuuut uuuppppp".

    So Angus, SHHHH, stop pushing the point :p

      Exactly what I was thinking, he just needs to stop stirring the pot!

    They don't do anything currently for UK customers VPN-ing to get access to US Netflix offerings, why would they change that for Australia?

    Won't be switching to AU Netflix unless the content is there. Otherwise I'll stick to living in Alabama.

    What a load of shit, It sounds like they are saying that every one who uses a VPN accesses Netflix for free, i still pay like every other customer.

      The impression I get from the article is that Netflix doesnt care how you access the service, as long as you pay for it.

      In a utopian netflix world, they would have the same content available in every country. Unfortunately, since the old world media rights remain in play, they cant do that so they have to restrict access based on location.

      As a result, Netflix takes a head in the sand approach and only restrict access as much as they have to, to sedate the content owners.

      I for one applaud netflix on their (in)action.

        The content owners still get their money, so I think they're pretty happy with it...

    Do people stream through a VPN? How does that scale?

      Private pay-by-the-month VPNs will give you pretty good throughput. Public VPNs are pretty shite. If you're only after Netflix though, you use a DNS re-direction service, like Getflix or unblock.us, which routs all your netflix traffic through their servers in the US, making it appear like your requests are originating from within the US as well.

        That's exactly what I will be doing when the NBN gets hooked up. Just waiting on the splicers.

          I use Getflix after moving from Unblock.US.
          Getflix is much cheaper, but on the flipside I think UnblockUs offered a better service.

          Sometimes on Netflix can take ages to load even with 100/40

      There's no need for a VPN, just use Getflix or Unblockus... It's a simple DNS change...

    it’s generally assumed that the Australian price will be a little higher than the $US7.99 a month paid Stateside for the basic service.

    The US price is $8.99 a month and it has been that way since May.

    Existing subscribers still pay $7.99.

    Plus the Australian dollar has really taken a dive lately, that $9 a month now costs $11, plus the cost of VPN or DNS proxy.

    Last edited 11/12/14 9:19 am

    People accessing content this way are at least paying for content that they could get just as easily for free. Why should Netflix chase them? It will force more people off the service and if the Aus price is too high put them back into torrenting. Plus the extra investigation fees will have to be charged back to the customers.

    Well done netflix making a sensible decision.

    I always laugh when I hear big corporations talking about arbitrage as though it's perfectly morally fine, and then talk about customers utilising the free marking by purchasing the best legal product at the cheapest price as though that's bad.

    Funny how they're all for a free market, so long as it doesn't actually mean they have to compete.

      Buying things from the US because they are cheaper is not arbitrage. Or even anything vaguely related.

      Last edited 11/12/14 10:03 am

        The basic definition of arbitrage is is the practice of taking advantage of a price difference between two or more markets. Buying an identical product or service from overseas because it is cheaper is taking advantage of a price difference between two markets.

          No, the basic definition of arbitrage is transacting simultaneously in separate markets to make a riskless profit.

          Unless you are somehow short selling AU netflix accounts to pay for US ones, what you are doing is referred to 'shopping'. Me going to Woolies because they have coke on sale for ten cents less that woolies isn't arbitrage, either.

            The OP did not define "purchasing the best legal product at the cheapest price" as arbitrage. In fact he distinguished between the two. His quite valid point was that both circumstances involve taking advantage of price differences between two markets for the same goods.

        I meant that the sellers are engaging in arbitrage, not the buyers.

        In fact technically it's not quite arbitrage. The sellers are actually engaging in monopolistic trading practices - they are entering into contracts that restrict the sale of their product to one single supplier, allowing them to have full control over the pricing of their product.

        They get to double up by charging a different price for their product because in the old days there was no way for Australians to escape the limits of being stuck in the Australian marketplace. Now that we can buy from other markets, their capacity to control who can buy what product, and to engage in artificial price differentiation is dissapearing, and subsequently so are their super profits - profits that they should never have been earning in the first place.

        The big media companies are very free with their labelling of people as "thieves" and "cheats", but nobody seems to be pointing out that they are actually cheats and thieves under the rules of the free market.

    If using US Netflix the companies are still being paid.foxtel is still paying for the rights ( GOT etc) so therefore they are still getting our Aussie dollars. I'm afraid content is gonna be split 3-4 ways.
    I'm simply pirating because shows like banshee,toast of London etc etc aren't available ANYWHERE on Oz TV,let alone what season or episode of Grimm etc is playing at 10.30 on a random night.most TV guides don't say

    Not sure I'd believe any numbers from Choice, let alone make them the basis of calculations.

    But ignoring that, don't these people have some VAGUE idea of the questions they'll be asked? Surely they can come up with better answers than these.

    How will Netflix deal with VPN users.... it won't? You can't really stop them. Sure you might identify a few IP's that could be blocked ,etc but most VPN companies have large IP blocks and of course multiple locations. suck it up netflix or offer aussies what you offer the yanks.

      It's not Netflix that needs to 'suck it up'...

    Can't wait to pay $30/month to Netflix instead of $60/month to Foxtel.

    Ahh who am I kidding, I just pirate everything because of:
    1) Pricing
    2) I want to own my content, not rent it.

    Netflix are PCI certified, and as such should not be storing credit cards in a searchable manner.
    This means that whilst you can ID a card as Australian when the purchase is being made you shouldn't have methods in place for searching for "Australian" cards.

    I hope they (netflix) continue to keep their head in the sand. Last thing I can be bothered doing is going back to private torrenting.

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