Try this: close your eyes and think about your favorite Netflix original series.
Black Mirror: Bandersnatch?
Ok, now if you could get your shows for free, would you?
Don’t worry; your answer is safe here.
But for the rest of the viewing public, the secret is out: piracy seems to be making a comeback and surprisingly, Netflix may be part of the reason.
That Netflix has become the Godzilla of video streaming services since its launch in 2007 is undisputed. In fact, its stats say as much: Netflix grew subscribers by 17% in the just-reported quarter, for a total of 139 million paying subscribers. In contrast, Amazon sits at 100 million subscribers while Hulu has signed a paltry 25 million. Netflix also announced its plan to spend a whopping $10 billion on original content in 2019, which is more than Amazon, Apple, HBO and the other streaming services will spend on a combined basis.
With so many programming choices available to consumers, why has BitTorrent traffic (piracy) increased 9.2% in the Americas, 19% in Asia and a staggering 32% across Europe, the Middle East, and Africa (2018 Global Internet Phenomena Report)?
The answer has to do with consumer convenience.
In music, we use piracy levels to help determine the health of the streaming market because it highlights a key value proposition for consumers: convenience.
Think about it.
Spotify proved that even in a world where music piracy is easily accessible, users are willing to pay for its convenience. These days, very few want to spend time searching sketchy, potentially virus-infested links on the internet just to stream Post Malone’s Sunflower if they don’t have to.
Perhaps, it’s this growing lack of convenience on the part of Netflix, Hulu and Amazon that is at the heart of why some consumers are switching back to piracy.
Where do we see this lack of convenience?
1) Market Segmentation. That is, there are too many players.
Let’s say you want to watch Stranger Things (Netflix exclusive), Handmaid’s Tale(Hulu exclusive) and The Marvelous Mrs. Maisel(Amazon exclusive).
Getting the picture?
That’s roughly an extra $40 per month to subscribe to all three services. And as streamers continue to invest in exclusive content, we will be forced to sign up for even more services or miss out.
Not very convenient.
And chances are good that this issue will only get worse for us as Disney, Apple and Facebook launch their own exclusive streaming services later this year.
2) Licensing. No really, it’s becoming a nightmare of inconvenience.
Were you disappointed when Netflix canceled most of its Marvel shows, like Daredevil and Luke Cage?
Remember, Disney, which owns Marvel, is getting ready to launch its streaming service this year (Disney+). And The Mouse not only owns Marvel, but Pixar, Star Wars, 21st Century Fox and part of Hulu.
So if you were hoping for Moana or any of the new Star Wars movies to stay on Netflix, you probably should rethink your monthly entertainment spend before Disney+ debuts.
Then you have AT&T, which owns Warner Bros. Studios and DC Comics, also planning to launch its own streaming service this year. So it’s not a stretch to imagine AT&T launching separate services to exclusively stream all things Harry Potter and Looney Tunes.
Also, not very convenient.
Internationally, licensing and distribution of all this programming is even more complicated. Local regulations and certain censorship rules across Europe and Asia, in particular, make content harder to find, forcing consumers to seek out alternatives, like BitTorrent.
THE TAKEAWAY: It’s All About Convenience
Both market segmentation and fragmented licensing force consumers to pay more and makes content harder to find. These combined forces create a perfect storm, effectively making individual streaming services less convenient—and therefore, less valuable—to consumers.
As a result, the trade-offs of piracy may be appearing more worthwhile.
What to do?
Moving forward, Netflix, Amazon and Hulu, among others, would do well to remember that the entertainment business spent the last two decades trying to battle piracy through all manner of heavy handed-tactics and lawsuits, only to realize that offering users convenient services (inexpensive, accessible, quality) was the best solution.
Streaming services need only look to see where people are going for their content.
They’re the customers.
If not, it may be them walking the plank.