Netflix Uses Piracy As Market Research, Isn't Afraid Of It Because It Knows It Can Offer A Better Service

from the but-of-course dept

We've been amazed at how few players in the traditional entertainment business recognize two basic facts: (1) file sharing is a form of free market research to get a very accurate picture of what people are demanding and (2) the best way to beat it is to offer a better overall experience. Of course, it shouldn't be any surprise at all that a company that does get both of those things is Netflix. TorrentFreak has the details of Netflix execs flat out admitting that they monitor file sharing sites to determine what to buy:

This week Netflix rolled out its service in the Netherlands and the company’s Vice President of Content Acquisition, Kelly Merryman, says that their offering is partly based on what shows do well on BitTorrent networks and other pirate sites.

“With the purchase of series, we look at what does well on piracy sites,” Merryman told Tweakers.

One of the shows that Netflix acquired the rights to in the Netherlands is Prison Break, since it is heavily pirated locally. “Prison Break is exceptionally popular on piracy sites,” Merryman says.

And, at the same time, the company isn't worried about the competition, because it knows (as people have been trying to explain to the legacy players for years), the best way to deal with infringement is to compete:
In a separate interview Netflix CEO Reed Hastings adds that his company is aware of the many people who download content without permission via torrent sites. However, this is not exclusively a bad thing, as it also creates demand for the content Netflix is offering.

“Certainly there’s some torrenting that goes on, and that’s true around the world, but some of that just creates the demand,” Hastings says.

Eventually these BitTorrent users may want to switch to Netflix as it’s a much better user experience than torrenting, according to the CEO.

“Netflix is so much easier than torrenting. You don’t have to deal with files, you don’t have to download them and move them around. You just click and watch,” Hastings says.
What's amazing, of course, is that the entertainment industry's strategy works against all of this. They focus on trying to crack down on infringement through legal efforts, driving much of this underground, and making it that much harder to understand what the market wants. At the same time, they try to squeeze more and more money out of the legitimate services by jacking up rates to unprofitable levels, making it more and more difficult to license the works. And when companies like Netflix can't license everything, that's when customers are less willing to pay.

It's a strategy that makes the problem worse, while they keep insisting they need to do it to make the situation better.
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Filed Under: competition, convenience, market research, piracy
Companies: netflix

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  1. icon
    PaulT (profile), 17 Sep 2013 @ 12:38am


    "Netflix doesn't replace piracy."

    In my experience - only because they're blocked from offering all the content their customers want. I've talked several people I know into using Netflix instead of piracy (although I did have to teach them how to use VPNs to bypass regional controls since no equivalent service exists in my country - thanks, idiots!).

    The general feedback I get is this - Netflix is awesome! Except, I want to watch film X that's not on there, or I want to watch season 6 of a show and only 4 seasons are available.

    Generally speaking, Netflix has a fast, reliable service that despite an occasionally clumsy interface is easier and quicker than piracy for content that's on there. But, people will still pirate whatever's not, rather than jump through whatever hoops the studios try to force them through.

    But it's certainly telling in my situation that people will still pirate even if they're paying. I know one guy who's paying for a VPN service, Netflix, Lovefilm, Hulu Plus *and* Vudu and he still pirates because some content is not available to him on any of those subscriptions. Call it wrong if you want, but it's very clear that the "people only want it for free" fiction is a lie.

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