Wednesday, 7 January 2015

Netflix elasticities

Big Content surely has somebody estimating the relevant elasticities, surely?

Netflix is getting a bit louder about that using Hola!, Unblock-Us, or other VPN options to ungeoblock Netflix context breaches the terms of service; they may also be running a few experiments on knocking out folks who are accessing via VPNs.

Absent the geounblocking option, some current Netflix subscribers would flip over to local distributors. Others would flip over to Popcorn Time.

Netflix claims that its service reduces piracy.

I'd love to see some decent diff-in-diff estimation looking at what happens to file sharing as titles move onto and off of Netflix's catalogue: that's the intensive margin. This U Georgia Masters thesis takes an initial stab at it.

The extensive margin is that having a Netflix subscription means you'll generally find something else to watch if the one that you were particularly keen on isn't available - so long as the base catalogue is big enough. When I couldn't watch Marathon Man because it isn't on Netflix, I watched something else rather than head over to the video store or to PopcornTime. To measure that effect, you'd probably need to track something like changes in by-zip-code copyright notices along with by-zip Netflix subscriber rates. The time trends on their own probably aren't enough.

You can also get it by looking at what happens to torrenting rates when Netflix opens in new markets, but that'll suffer from attenuation bias where the high demanders were already accessing Netflix via VPN.

Chris Keall worries that when Netflix officially launches in New Zealand, its content offerings will be pitiful by comparison to the American ones we're already getting, and that the launch will be accompanied by crackdowns on VPN-based users.

I worry that they could do one worse and start checking the addresses on the credit cards used for payment; the workaround for that is harder. I have every confidence that tech will outpace VPN crackdowns. But getting US-based payment methods where the anti-money-laundering regs mean you have to give a social security number to get a US cash debit card - that's harder to route around, and Netflix doesn't take Bitcoin.

There's a current workaround, but it depends on Netflix's continuing to have gift cards. And I'd likely also lose the ability to flip to Netflix UK, Canada, Brazil, or elsewhere to get content.

I wonder how many people will flip to Popcorn Time if Netflix makes it too hard to access a decent range of content.


  • In praise of Netflix - in which Paula Browning fails to explain why there's any difference between parallel importing shoes and parallel importing films.
  • Netflix and fixed costs - in which I reckoned, wrongly, that Netflix wouldn't bother starting up here.
  • Netflix Premium - in which I wished that Netflix would offer a quadruple-the-cost subscription with more content.
  • Copyright Chilling Effects - in which Sky's lawyers didn't like my posting on how to geounblock.


  1. The problem is that in the end, people will resort to torrents (or similar illegal methods) should the legitimate means become too onerous.

  2. That's the elasticity they have to be worried about...