Has Netflix made its first mistake yet by betraying its growing network of loyal customers?
In a statement, titled “Evolving Proxy Detection as a Global Service”, Netflix Vice President David Fullagar said that he wants to prevent its subscribers from using Internet proxies or hide behind Virtual Private Networks (VPNs) to access content outside their own countries.
“[…] in coming weeks, those using proxies and unblockers will only be able to access the service in the country where they currently are. We are confident this change won’t impact members not using proxies.”
We can only make assumptions as to why Netflix has decided to do this. What is certain though is that, for many, this move will definitely change the perception they have on Netflix. A perception of a new business model that not only has depended on the Internet as a new business model, but has also respected its ability to offer users a variety of options.
We need to acknowledge of course that Netflix has not had an easy ride. It is somewhat a common secret that Netflix has faced a big challenge to license or keep licensed content for its users. As the company grew, so did the costs associated with licensing content.
In 2011, analysts estimated that Netflix spent $700 million for content licensing, which was expected to go up to $1.2 billion in 2012. This is a lot of money. No, wonder Netflix has consistently over the past few years tried to rely less and less on the content of others and has focused on creating its own original one. Shows like the House of Cards or Orange is the New Black have been hugely successful for the streaming giant and have even been part of the awards glitz and glam, but are still not enough to keep Netflix in the content competitive race.
And, in August of last year, Netflix’s deal with Epix – the distributor of Hollywood blockbuster like the “Hunger Games” and Transformers ended, which automatically made the company’s share tumble for a little while.
So, the hard truth is that Netflix needs Hollywood more than Hollywood needs Netflix. But, what Netflix needs even more than Hollywood is the trust of its customers. And, their latest move seems to be turning its customers away from the company in a time when Netflix needs them most. As the company prepares for a huge expansion in more than 130 countries, one cannot help but wonder whether the streaming giant will appeal to users in countries with a confined catalogue.
As soon as news that Netflix would ban users from using VPNs, the Twitter-sphere want on fire. Here is a selection:
In the Internet, trust is as important as water is to human life. Unless users are able to trust the provider, the services and their delivery, then they look for something else. In this sense, trustworthiness and trustability walk hand-in hand. In a Harvard Business Law Review article examining “Trust in the Age of Transparency”, the authors make it clear that “[for a company to succeed] beyond trustworthiness, you must achieve “trustability.” It’s a more proactive stance that has you not just keeping up your end of a bargain but ensuring that the bargain is the best one from the customers’ point of view […]”. Not allowing users innovative ways, like using Internet proxies, to access your content is certainly not what is best for Netflix’s customer base.
Netflix appears as if it is turning its back to its users. But, to what end? Netflix could easily use the fact that users opt for VPN to demonstrate that the current licensing regime is simply not working. It could use this data to demonstrate that in a global place like the Internet, we need to work towards identifying a more efficient, cost-effective and reliable way to license content. Instead, it opted for the ‘easy’ solution.
We will just have to wait and see whether in the end Netflix will lose customers. But, notwithstanding this, Neflix will never be for its users what it was when it started.
Konstantinos Komaitis, the individual!