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.

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