Netflix zones

A few points on the threatened Netflix crackdown on geounblocking:

1. Whether Netflix turns a blind eye to geounblockers is a matter for them to discuss with the content producers selling them the licenses for different regions. It is totally fine for Netflix to check whether its users are breaking the terms of their licenses and to decide whether to enforce those terms. It would be not fine for the government to force them to do so, as it's just parallel importation. But this isn't that.
2. In deciding whether to go hard, Netflix will have to weigh:
1. The costs imposed on legitimate users who travel and whose family activity will look a lot like geounblocking - you're on business in the UK; family's home in the US;
2. The losses from those who, like me, would unsubscribe from Netflix entirely if restricted to the content available to NZ subscribers;
3. Its position with its rights-holders;
4. Whether it is actually possible to hit VPN users and how far they really want to go: threatening account cancellation for those whose primary viewing country doesn't match the credit card might be effective for a lot of users who'd have a tough time sourcing US-based cards.
3. On the customer side, those who VPN might need to be a bit more careful and stick with one country's content for a while until we see what they're actually doing. No more flitting over to the UK for more episodes of The Thick of It, then back to the US for other stuff.
4. On the NZ government's side, they might consider whether New Zealand's doing something particularly stupid in requiring that streaming providers get NZ classification labels for streaming video. Netflix has a ton of long-tail content. The fixed costs of getting NZ labels for each title could well be unduly shortening that tail.

The Censor's Office made a big deal of that they can classify things quickly and under urgency to meet international schedules. But look at this:

Working in close cooperation with the Film and Video Labelling Body and Netflix, the Office processed these submissions from Netflix rapidly. The submitter was organised, all material was able to be viewed and they provided clear information about their commercial priorities. The total regulatory cost for Netflix of establishing themselves as a fully compliant, responsible provider of on demand video to New Zealanders was less than $150,000. 

Ok. Netflix is $10/month for the basic package in New Zealand. A customer generates $120/year in revenue. So Netflix needed over a thousand customers just to cover the regulatory compliance costs of getting the NZ-specific labels. And Netflix, here, has about a third of the tv shows as are available in the US and about a third of the movies. I don't know how much of that is rights issues, and how much of it is costs of getting labels on oddball long-tail content. The OFLC cites classification costs of $1124.40 per title. So, for anything that isn't already NZ-rated, Netflix would have to expect that the title would draw in ten more NZ annual subscriptions to recoup that cost.

Note further that this will hit smaller NZ operators like QuickFlix or Lightbox even harder: they then either lag Netflix in content, or front-foot the regulatory costs per title over (presumably) smaller subscriber bases with others then able to coat-tail.

Wouldn't it make more sense to require that streaming content providers provide the country-of-origin's rating for content, and a link to an equivalences table for those who want to know what different countries' classifications mean? The OFLC even provides one, right here. Instead of on-demand streamers having to sort out classifications for each title in New Zealand, they'd just need a couple links on the homepage. And remember: those who want more stringent censorship can always get it by subscribing to Family First's new service.

In irony watch: I also subscribe to UK's NowTV, a Sky subsidiary, via geounblocking.

Chris Keall's piece at NBR is worth reading, as is the Stuff piece on whether the crackdown is feasible.

Choosing censorship

Over the Christmas break, I saw a bit of Twitter mocking of the new Family First streaming video service. I love that this service exists. I won't use it, but everyone who hates censorship should celebrate this development.

Why?

There is even less need for a New Zealand Censor's Office to classify or censor online streaming options. The case for its doing so was always pretty dubious. The same technology that delivers the content also obviates the need for OFL classification: there isn't much that would stream in New Zealand that hasn't been rated overseas already, so under a reasonable regulatory regime that we do not currently have, they could just put on the overseas rating.

Reputation constraints already give Netflix and others sufficient motivation to avoid messing up the ratings: there would be ...adverse headlines... if one of them served up pornography under a G rating.

But suppose that there are some parents who:

1. Just can't understand what the foreign ratings mean;
2. Can't be bothered to look up more details about the content from any of the numerous sources available - even IMDB now has a "Parents Guide" for films;
3. Want to make sure their kids don't see anything they find objectionable.

They now have a good option. Subscribe to the Family First option, set the controls for whatever language, violence, or adult themes you want, and done. The folks with high demand for this flip over to Family First; everyone else can be left alone. 

This will matter more as Netflix gears up for worldwide content licencing. 

In New Zealand, I expect that rights arrangements are a fairly binding constraint. But as licenses expire and Netflix buys up worldwide distribution rights on a whole pile of content - including potentially weird foreign content that's never been NZ rated - the ratings regime is going to be a binding constraint. 

And then Netflix will have to decide whether to bother getting NZ ratings on a pile of fringe demand arthouse stuff, or just not offer that content to NZ subscribers. The latter's a lot easier - and especially since they can't really be outcompeted on this margin: Anybody who fronts the fixed costs of classification fronts them for every provider who wants to distribute that content. 

Would it really be that terrible to just let providers here use American, or European, classifications even for R-rated material when anybody can, in two clicks, find out anything they want to know about that content - and when those who are really really sensitive can just sign up to Family First?

Copyright chilling effects: NZ geounblocking edition

A few things puzzle me in the rights-holders' cease and desist letter to New Zealand ISPs offering "Global Mode" services. That's likely because I am not a lawyer.

These services make geomasking easy for broadband customers rather than requiring them to install Hola! or use Unblock-us (or any of the other alternatives).

People in New Zealand using geomasking to subscribe to US or UK-based content providers are in breach of the foreign provider's terms and conditions, which require that you be based in the US or UK. But being in breach of a foreign provider's terms and conditions is not, as I understand things, illegal. It just means that they can cease your service if they choose to catch you.

Netflix's Terms & Conditions prohibit the viewing of content anywhere other than within the country or location authorised by Netflix. When you sign up with Netflix and geomask to pretend to be in the US, you are in breach. The sole remedy provided in the T&C is in Section 8: Termination. If you are in violation of the terms, they can kick you out of the system.

So the first thing that puzzled me in Buddle Findlay's notice to the ISP was 6.c's suggestion that a breach of foreign terms and condition makes Global Mode service unlawful:

Is it really illegal to breach terms of service? Maybe you could get civil action by the firm whose terms you breached, but by a foreign third party? 

Section 35 of the 1994 Copyright Act lists how you can infringe copyright by importing a work. 

Part 1 explains that, as I read it, if you buy a bootleg DVD overseas, know or reasonably ought to know that it's bootleg, and bring it home without getting a licence, and intend to use it other than for private and domestic use, that's infringing. But you need all the "ands": other than for private and domestic use seems applicable. Further, if it were a legal DVD abroad, it wouldn't be infringing here. 

Part 2 deals with default presumptions in civil proceedings.

Part 3 says that importation of copies of films within the licensing window for other than private and domestic use is forbidden: they basically want the movie theatres to have a decent shot at airing a film here first. The only person importing Netflix from New Zealand is the end-user, not the ISP or somebody providing a geomasking service to a New Zealander. 

I just can't see how a consumer streaming Netflix into New Zealand in breach of Netflix Terms & Conditions is in breach of NZ law, nor do I see anything here saying that an ISP is liable if a customer does this. 

The only reference I can find to geographic restrictions are in terms of an exclusion to the forbidding of circumventing technological protection measures (DRM, basically). In short, it's illegal to break digital rights management. But there's a huge exclusion there carved in: 

For the avoidance of doubt, does not include a process, treatment, mechanism, device, or system to the extent that, in the normal course of operation, it only controls any access to a work for non-infringing purposes (for example, it does not include a process, treatment, mechanism, device, or system to the extent that it controls geographic market segmentation by preventing the playback in New Zealand of a non-infringing copy of a work)

It is hard to read this other than as Parliament very clearly wanting Kiwi consumers to be able to use region-free DVD players for viewing of parallel-imported DVDs, whether or not foreign DVDs come with shrink-wrap licence conditions requiring only watching the discs within the zone of purchase.

It is also awfully hard to tell just what provision of the Copyright Act Buddle Findlay thinks Global Mode is breaching. They don't cite any specific provisions of the Copyright Act; they just kinda point at it. Again, IANAL: maybe it's common for lawyers to be really vague about things to avoid foreclosing options later on, but I would have thought that they'd have pointed to some bits of the law that actually make it illegal for New Zealanders to use geounblocking to watch Netflix - if Global Mode is really misrepresenting things by telling customers it's legal, wouldn't there be some part of the law they could point to saying why?

Chris Keall, whose reporting at The NBR on this file is second to none, notes that the geomasking company can't afford to fight the heavyweights in court and so will have to pull its service, but that they're going to the Commerce Commission.

If the rights holders are mad about all this, wouldn't the more logical approach be for them to talk with the folks who sold them the rights in the first place and who also sold rights to Netflix (and others) without as much geographical segmentation as the rights holders expected?

Previously:

• Copyright chilling effects
• An end-run around film parallel imports?
• In praise of Netflix

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.

Previously:

• 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.

An end-run around film parallel imports?

I've been annoyed about New Zealand's film classification regime for a while. I hadn't considered the copyright and licensing angle on it.

Recall that New Zealand generally runs a free parallel importation regime. If some brand wishes to enter into restrictive licensing arrangements for retail distribution, the New Zealand government generally sees no reason that it should go about enforcing those deals where they restrict Kiwis' access to imports. So if some retailer is the only officially licensed supplier of a brand of shoes, The Warehouse can still import a container load of them for sale in their stores. The producer can punish the wholesaler who sold the the shoes to The Warehouse, but there's no recourse in the New Zealand courts. Parallel importation is legal. There is a carve-out in which you cannot parallel import films for nine months after the films' first release anywhere in the world, to give some time for the theatres to have a go, but otherwise things are open. Here's MED's FAQ.

Now recall further that the folks with local distribution rights are mightily annoyed with parallel importation. And the film distribution companies that sell rights to Netflix prefer being able to engage in pretty serious geographical market segmentation. Where Kiwis can pretend to be American through use of ISP global modes, or Hola!, or any of the various other VPN arrangements, geographic market segmentation breaks down.

New Zealand's censorship regime then gives an end-run around parallel importation: you can't legally import a film that hasn't been classified here and you can't distribute one that doesn't have the New Zealand film classification. Having the US one isn't good enough. Where some NZ ISPs advertise a global mode that facilitates subscribing to Netflix, the Censor's Office reckons they're complicit in helping the importation of films that haven't been rated. I would have thought that 122 (3)(b) and 122 (4)(b) meant that ISPs couldn't be liable, but I'm not a lawyer.

And so it's all rather interesting that The Film and Video Labelling Body has weighed in on the Censor's Office's legal run against Slingshot and Orcon.

The Film and Video Labelling Body, an incorporated society whose members include the likes of Sony, Universal, Paramount, Spark and The Warehouse, does most of the legwork involved in issuing labels to non-R-rated films.

Operations manager Sharon Rhodes said it expressed concern to the Office of Film and Literature Classification about online services bypassing the New Zealand labelling system early this year, but had not specifically mentioned Slingshot or GlobalMode.

Spark, which launched online television service Lightbox in September, had raised concerns with the labelling body last year, she said. "I brought it up at our annual meeting in May and members were pleased to see it was something we were looking into."

Rhodes said she agreed with the chief censor's view that Slingshot had breached the Films, Videos and Publications Classification Act by offering GlobalMode as a means for New Zealanders to access services such as Netflix.

The cleanest solution? Fix the law so that a New Zealand classification is no longer required. Require instead that films carry the rating of any country's classification office from some list of countries whose classification decisions generally seem to make sense, or that tend to correlate strongly with New Zealand's prior decisions. It makes no kind of sense that a small country should re-classify every movie for the New Zealand market; we should be relying on others' work here.

Canadian content

Suppose that you're a government agency charged with ensuring that the greatest number of Canadians get to hear Canadians' own stories.

And suppose some new technology came in allowing Canadians, for a low monthly fee, to stream and watch whatever they might want.

Would you:

1. Try to make it really really easy for that company to licence Canadian content, so that Canadians and everybody else might get a chance to see it?
2. Hassle the company and demand that they subsidise the production of Canadian content?

If you're the CRTC, well, they've picked option 2. 

During CRTC hearings on the future of Canadian television regulation, both companies argued they shouldn't be subject to CRTC regulation, which would force them to be licensed, host a quota of Canadian content and subsidize Canadian television production.

Google and Netflix argued they stream and produce plenty of Canadian content without the CRTC looking over their shoulders.

Both refused to hand over their Canadian content and subscriber information to the CTRC to back up those claims.

"The Commission cannot carry out its duties based on mere anecdotal evidence," the CRTC wrote. "As a result, the hearing panel will reach its conclusions based on the remaining evidence on the record."

I note that Netflix recently lost streaming access to The Kids in the Hall. But Trailer Park Boys still features prominently.

Wouldn't it make more sense for the Canadian government to hit the back catalogues of everything the Canadian government has helped to fund, from The Beachcombers through Degrassi and KITH and everything in between, and help Netflix to get the bundle of rights to allow for streaming? They could also make it a condition of every future funded TV show that the streaming licence is available to all-comers at a reasonable price? If the objective is to ensure maximum dissemination of Canadian content, shouldn't that be the approach?

Netflix doesn't have to run a Canadian outlet. They could kill the official Canadian version, then simply fail to notice that a pile of Canadians sign up using geounblocking services and a 90210 zip code.

PopCorn Time

Curious to see whether PopCorn Time is as easy to use as Netflix and consequently potentially ridiculously disruptive for the movie industry, I gave it a trial run. At no point did I view more than 5 seconds of any film: I just wanted to know whether it works well. I deleted the programme immediately on completion of the trial. I pay for my content.

Here is my entire experience.

I read about the programme at Music Industry Blog [HT: Duncan, who reports a satisfactory OSX experience]. I then searched around for the install files, and found only the stories from a few days ago of the programmer having pulled the programme. As it's open source and was up at GitHub, a pile of alternatives remain available. Had I simply followed the link from Music Industry Blog to the writeup at TechCrunch, I'd have found it more easily. Downloading and installing from there was simple: extract the .zips to a folder, run the .exe.

The programme has a very slick interface. I decided to run a few 5-second samples from the middle of a few films to check:

• Does the film work?
• Is the viewing quality reasonable, or is it some shaky camera from inside a movie theatre?
• Sound quality, including language.

Here is my entire experience.

I started Popcorn Time. Browsed through some content. Hit the following:

• Princess Mononoke: Was in Japanese, no English subtitles, not advertised as being the Japanese version, though non-English subtitles were advertised.
• A set of films then failed to load: they went from the buffering notice to only a spinning circle of failure. I then restarted the programme. On second go-round, I retried some of those films. And:
• Frozen: Buffering took twice as long as typical Netflix start. But excellent quality. Choice of 720P or 1080P.
• Wolf of Wall Street: Buffering took four times as long as typical Netflix start. But decent quality. Worse resolution than typical Netflix, playback stopped briefly during play.

Then, I tried the search bar instead of just hitting things in the browse window. 

• My Neighbour Totoro: no results
• Strange Brew: no results
• Goodbye, Pork Pie: no results
• Rambo: the search window started hanging, had to restart the programme. Restarting it took a rather long time; was about to force-close when it came up. It came up with First Blood, which worked in 720P. 
• Amelie: Worked fine. All in French (as it should be, but not advertised as such), no subtitles. 480p.
• Transformers: pulled up the three new movies, didn't find the old 80s cartoon. I didn't hit the links.

I've now deleted the programme, as I pay for content and was only interested in seeing how well this works. It does seem a reasonable alternative to paid content. Compared to Netflix, it has much more new content, but also more surprises - as you'd expect from a torrent server. There are reasonable odds you'll come up with foreign-language versions of foreign-language films, you're likely to have to restart the programme a few times as you go, but I didn't catch any Russian-dubbed versions of English movies (though I didn't sample many movies at all). 

It isn't good enough, in my view, to dominate a paid version where folks wouldn't get these minor surprises and necessary re-starts, but I have a fairly high willingness to pay. The glitches were irritating rather than experience-destroying. It's dead-simple to install and run. In the absence of a paid version offering similar functionality, a lot of folks will find Popcorn Time awfully tempting.

I do not encourage you to install and run Popcorn Time. It is still stealing content. Netflix with geounblocking - at least I'm still paying for it. If you do decide to install and run it, play careful: I suspect the programme could well attract folks who wouldn't think to mask their torrenting appropriately. You'll have to do your own searches to find out how to do that.

Spark

NZ's big telco, Telecom, is pushing into Internet TV; the Spark rebranding signals the change. @JamesMeager asked what I thought about it.

Setting up a streaming TV/Movie service in New Zealand has huge fixed costs relative to the size of the market. Quickflix streams within NZ for $15/month, about what Netflix + Hola! Premium costs, with a smaller range of content than Netflix but with rather a few titles that Netflix doesn't have. They supplement it with pay-per-view access to recent films. Their 2013 Annual Report lists operating costs just north of $11 million, including all the costs of their DVD-by-mail service and digital content fees, for about 100,000 customers. Telecom says they're going to spend $15 million next year buying content.

There are plenty of folks who haven't signed up to Netflix because figuring out Hola! has proved a bit too tough or because they don't want to list a US Zip Code. So there's a large potential market of people who haven't figured out Netflix. But since, at least initially, Spark's ShowMeTV service will be running through your browser rather than via a set-top box or a dedicated app in your TV, their market would be those folks happy to watch TV or movies on their laptop or tablet, and those few people who have been able to figure out how to hook their computer up to the TV but who haven't been able to figure out Hola, and those whose TVs have a decent inbuilt browser app. That's the same market Quickflix is serving (barring the DVD-by-mail part). ShowMeTV would have one strong advantage over Netflix: the technical hurdles for streaming Netflix from NZ using your TV's inbuilt browser are much higher than streaming something that isn't geoblocked.* And, they're working on an HDMI port dongle.

The Herald cites unnamed analysts saying ShowMeTV's success would depend on lining up content like Game of Thrones or Breaking Bad. I'd be surprised if they could buy the rights to that kind of content on their current budget, but I'm also not sure it would be critical: just having a great stable of on-demand shows that are better than anything currently playing on TV can worth a subscription. CEO Simon Moutter addresses this in his NBR AMA; they'll be building up content.

Paul Brislen notes a few interesting features. I'd expected that Spark's offering would be a top-up for subscribers to their broadband packages; Brislen says ShowMeTV won't be restricted to Spark broadband subscribers.

I won't be subscribing unless they're offering a better content selection than Netflix. I'm pretty price insensitive: I'd be happy paying three or four times what Netflix is charging for a substantially augmented content package. But I expect I'm not ShowMeTV's current target audience.

* I doubt you could run the Hola! plug-in using your smart TV's inbuilt browser; you'd then need to move to router-level solutions.

Classification Costs Revisited [and updated]

Another potential reason that Kiwis have to access Netflix by pretending to be American: classification costs.

Any film distributed to the public in New Zealand must carry a label from the New Zealand Office of Film & Literature Classification. There is no exemption for films or games.

Suppose that Netflix wanted to open an official NetflixNZ and had somehow sorted out all the rights issues with all the rights holders.

Next step is to check its film catalogue against the NZ classifications database. For any films already classified in New Zealand, they'd need to attach the NZ classification sticker somewhere to the start of the programme, or maybe in the programme description.

Digital labels for online content can be obtained from the Film and Video Labelling Body. You can call the Labelling Body on +64 09 361 3882, or email them at enquiries@fvlb.org.nz.

What if a downloadable film or game is supplied from an offshore server?

While distributors may be supplying games and films from servers not based in New Zealand to New Zealand-based customers, the supply activity falls under the jurisdiction of the Films, Videos, and Publications Classification Act 1993. Restricted games and all films that are not exempt from the labelling requirements should be classified and labelled for supply to the New Zealand public regardless of the source of supply or the platform used to download the material.

Anything not already classified for distribution in New Zealand would need to be classified. 

If the film already has a UK or Australian unrestricted rating (G, PG, or M in Oz, U, PG, 12 or 12A for the UK), they'll issue the NZ equivalent (G, PG, or M). I do not believe classification fees apply in this case.

If the film has a UK or Oz restricted rating (MA15+, R18+ in Oz, for example), the Classification Office will review the film itself; the fees below then apply.

Classifying a DVD cost $1000 as of a couple of years ago; it's $1124.40 now. You have to fill in forms for each film and wait until it's reviewed; a 50% surcharge for urgent consideration can cut down delays. Some films are exempt from classification requirements; somebody at Netflix would need to read the legislation and decide whether particular films met the requirements.

Here's the flow chart for each film Netflix, or anybody else, would want to stream in New Zealand.

Netflix has on the order of 3000 streaming movie titles. They also have on the order of 20,000 streaming TV episodes. How many of the movie titles have already been rated in New Zealand? I don't know. Here are some of their recently rated films.

TV shows come under the Broadcast Standards Authority. They have their own classification systems for Free-to-Air and Pay TV; the same show will get a different classification on Free-to-Air than it would get on Pay TV. A watermark with the classification comes at the start of a show on television.

Would a streaming-only service providing access to TV shows that hadn't before aired in New Zealand come under the Broadcast Standards Authority's Pay TV Code or the Office of Film Classification's DVD rules? The Pay TV Code requires visual warning labels immediately prior to content, so Netflix would need to add watermarks. But, DVD box sets get OFC classification categories. I don't know whether Netflix-streamed TV series would come under the OFC's rules or the BSA's PayTV Code. I think that the latter would have Netflix supply its own ratings, but would allow NZ-based viewers to complain to the BSA were any of the codes out of line with community expectations.

I would be surprised if classification costs were the main hassle stopping Netflix from officially taking Kiwi subscribers; rights issues seem even worse. But wouldn't it be reasonable for us to start simply accepting any UK, US, Canadian or Australian film classification as good enough for New Zealand purposes?

Update: Broadcasts come under the BSA; everything else seems to be OFLC. Broadcasting means "any transmission of programmes, whether or not encrypted, by radio waves or other means of telecommunication for reception by the public by means of broadcasting receiving apparatus but does not include any such transmission of programmes:
(a) made on the demand of a particular person for reception only by that person"
I read this as saying that on-demand streaming isn't broadcasting.
Section 122 here says that distribution of restricted or objectionable publication includes transmission other than broadcasting. Section 125 makes it a strict liability offence to supply or distribute a restricted publication other than in accordance with New Zealand's classification regs. I expect that means Netflix would have hassles here, but I'm no lawyer.

Netflix Premium

Last year brought Netflix euphoria. I figured out how to access it from New Zealand and fell in love. Where I had been ripping my DVD collection to hard disk to save on storage costs, punting boxes of DVDs to the garage, I started just checking whether each was available on Netflix. It's easier to stream than to rip.

And so the New Year brought a reduction in Netflix's stock of film rights. Where rights-holders had been happy to sell them streaming rights at low costs when Netflix wasn't much of a competitive threat to their cable offerings, that changed when folks started seeing them instead as substitutes. Bloomberg explains that they just can't maintain their library on $8/month subscription fees.

I'm sure that the Bloomberg piece is right. But what about $40/month subscription fees? I'd be happy to pay that much for streaming access to everything in Netflix's DVD collection. They could call it Netflix Premium.

I don't know that this strategy could work. The rights-holders would rightly expect that most Premium subscribers would be substituting away from some of their (potentially) higher value cable subscribers, and, more importantly, away from their DVD and Blue-Ray offerings. But they'd likely also be picking up some who never would have paid for a DVD but were hitting the Pirate Bay.

Things that consequently need testing:

• What's the elasticity of downloading with respect to Netflix availability? We've the potential for some clean tests, with films coming into and out of Netflix availability, along with differential geographic access to Netflix. 
• What's the elasticity of DVD/BlueRay sales with respect to Netflix availability? Same testing potential as above.
• If Netflix does more to turn pirates into paying customers than it does to induce cable/DVD customers to flip to Netflix, then making it too expensive for Netflix to get rights is a bad idea.

In Praise of Netflix

I didn't know how good it was going to be. I weep for the surplus I failed to obtain because I hadn't bothered setting up a very very simple VPN plug-in that would let me sign up.

Here's NZ ISP Orcon's explanatory guide. But even that makes it look too hard. Here's how you get your surplus.

1. Install Hola. It's a Chrome browser plug-in. Just follow the directions in your browser.
2. After installing Hola, hit the button on the Hola browser page for Netflix. You'll be signing in as American. But simply clicking the little flag later (accessed by hitting the >> symbol up at the top right of your screen) lets you be British, Brazilian, Canadian, or whatever you like.
3. Sign up for Netflix using your NZ credit card. Put in a US Zip code. That's it. You're now a Netflix member. Because we only wanted the online version, it didn't ask for a street address.
4. Watch Season 5 of Breaking Bad. When you want to watch Season 5 Part 2, you'll need to be British. So look at (2), above, and be British. Netflix will say "Hey! You're on holiday abroad! Content here differs." If you want to know what country you need to be to watch which content, hit CanIStreamIt. 

You could also use Unblock-us if you need router-level IP geomasking for multiple devices. I've had no problems with Hola, but have heard nothing but great things about Unblock-us as well.

Here's the NBR from last week:

"I got Netflix working at home last night, piece of cake, because I read an article somewhere on how to do it," the Orcon boss [Orcon CEO Greg McAlister] told NBR.

Netflix the US online service that lets you stream unlimited TV programmes and movies for $US8.95 a month. You can watch them on your regular television if you've got the right wi-fi gadget (such as Apple's $159 Apple TV box, which has both Netflix and Hulu apps if you sign in on a US account). In the US, according to Wired, the street-legal Netflix now accounts for more internet traffic than BitTorrent services, often used for shady sharing. Given the choice, it seems most people will do the right thing.

Sky TV has recently taken a front-foot approach, requesting that lines about how to connect to Netflix be removed from an Eric Crampton article.

But it might be the proverbial case of a finger in a leaking dyke.

When Green Labour* MP Clare Curran tweeted my NBR piece on getting Netflix, CEO of Copyright Licensing NZ and Chair of the Copyright Council of NZ Paula Browning jumped in. Clare pointed out, correctly, that Netflix lets people pay for content. Here's the rest of the conversation.

@clarecurranmp @EricCrampton that ignores distribution agreements in specific territories in which the local broadcaster has invested
— Paula Browning (@PaulaJBrowning) October 3, 2013

.@PaulaJBrowning @clarecurranmp We ignore dist agmts Rolex might have with locals when we allow parallel import. What makes you special?
— Eric Crampton (@EricCrampton) October 3, 2013

@EricCrampton @clarecurranmp I'm very special! We're talking industry & employment here. Its not a simple them vs us issue
— Paula Browning (@PaulaJBrowning) October 3, 2013

@PaulaJBrowning @clarecurranmp Sure sure, but why should copyright industries get protection from parallel import but not other industries?
— Eric Crampton (@EricCrampton) October 3, 2013

@EricCrampton @clarecurranmp whose talking copyright industries? These businesses aren't the artists. They pay huge $$ for distn agreements
— Paula Browning (@PaulaJBrowning) October 3, 2013

@PaulaJBrowning @clarecurranmp Suppose I pay $$$ to Nike for exclusive distribution rights. Then Warehouse parallel imports tons. Same thing
— Eric Crampton (@EricCrampton) October 3, 2013

I didn't get any reply, so I still don't know on what basis she'd distinguish exclusive dealing rights for copyright industries from exclusive dealing rights for other industries. Parallel importation does wonders in helping to keep prices down in what's otherwise a very expensive place to live. You can arrange with Nike that you're the sole authorised retailer of their shoes in New Zealand. But if The Warehouse (our version of WalMart) can source a few containers of them from a Taiwan wholesaler, the New Zealand government doesn't see any reason to force other people to comply with whatever deal you made with Nike. If Nike wants to get mad at their Taiwan wholesaler, that's up to Nike.

I don't expect that the current situation is sustainable. Content providers who want to segment geographically are going to start leaning on Netflix to increase the barriers to folks outside the US using Netflix US. There's nothing they can do that cannot be circumvented, but anything that increases the fixed cost induces folks who need their grandkids to set their microwave clock to stick with Sky. I expect that some of Netflix's welcoming attitude towards foreign subscribers is to enhance their bargaining position in forcing that rights issues in dumb small markets like New Zealand get sorted out.

A few predictions:

• Video rental outlets will shift towards content enjoyed by those who cannot figure out how to set the time on their microwave oven clocks. 
• Sky will further emphasize live sport, making it even worse a deal for folks like me.
• I will not find any adequate explanation of what makes HBO distribution rights substantially different from Nike distribution rights. 

Previously:

• Copyright chilling effects
• Netflix and Fixed Costs

* Egads. Error entirely mine. I'm so used to it only being the Greens who like what I have to say on copyright, that I'd just started assuming that any MP hitting me on it was from the Greens.