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
    Rikuo (profile), 17 Sep 2013 @ 10:33am

    Re: Re: Re: If this isn't true for most of the media companies, I'd be surprised.

    I can see your point. In the show, anyone can have a replicator in their home, and (assuming its programmed not and illegal to produce things like fire-arms or other dangerous items) they can make food or whatever whenever they want. However, Quark on Deep Space 9 runs a bar that sells drinks, but I imagine that what is being paid for there is not the drinks themselves, but the service and a seat, which are scarce items...even though this is contradicted by the First Contact movie, where Picard says flat out that there is no money in the 24th century, without giving examples of where it still exists, just flat out says no money.

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