Netflix is rapidly finding that exclusive original programming is the solution to some of its subscriber problems. We are kind of enjoying watching these “cutting edge” Silicon Valley “innovators” come to conclusions that are circa 1950 for our business, but glad that they are figuring these things out gradually. Yes, Mr. Hastings, that’s called a “network.”
But in the Golden Age of Internet, that also means those who pay for the programming also support those who sell advertising to ad publishers who distribute illegal copies of that programming. When both those who produce the programming and those who sell advertising are Silicon Valley tech companies, that’s an interesting problem of economic interdependence.
Keven Spacey is the star of one of Mr. Hastings most successful programs, House of Cards. I would bet that Mr. Spacey has a nice piece of the back end on that show, which makes him Mr. Hastings partner for real. I know it’s kind of tough for a Silicon Valley oligarch to see himself in partnership with a mere actor, but stranger things have happened.
Mr. Hastings has been remarkably quiet about piracy that I’ve seen–correct me if I’m wrong. Ellen Seidler’s research into advertisers on pirate sites showed Netflix as an early entrant with ads all over Megavideo. Not surprising since Netflix studies piracy to determine the popularity of shows to pick up in foreign countries–produced by third parties. Mr. Hastings has clearly sucked down a bunch of Google koolaid, suggesting that what people who steal movies really want is a good legal alternative. Yes, if only they had that legal alternative, they’d stop stealing. (This line of argumentation is also known as “blame the victim,” very popular in Silicon Valley.)
In fact, Mr. Hastings claims that Bit Torrent traffic dropped by 50% in Canada after Netflix launched there. (You don’t mean that uTorrent induces infringement, surely?)
Of course, up until it got into producing original programming, Netflix was only licensing pirated works. And being pirated a lot is a good way to drive the value down. The conversation between Netflix and a producer goes like this: “You want me to pay you to license your movies? Are you aware that millions of copies of your movies are being stolen on Bit Torrent sites in [COUNTRY]? You should pay me to launch in [COUNTRY].”
Yes, it’s a bit different when what’s being stolen is your own production that you deficited with your own money.
Mr. Hastings’ business partner Keven Spacey does not seem to think much of the idea that failing to offer a legal alternative excuses bad behavior. Recently speaking at the Bollywood film awards (held in Tampa, Florida for some reason), Mr. Spacey said:
“‘House of Cards’ is really big in India, I discovered,” Spacey told reporters late Saturday as he walked the ceremonial carpet into the packed stadium.
“Except isn’t it funny that Netflix doesn’t exist there yet. Which means that you’re stealing it,” he said.
And Mr. Hastings said…nothing.
Spacey, who won Oscars for his roles in “American Beauty” and “The Usual Suspects,” delighted the crowd at the Bollywood awards by wrapping an Indian sarong around his waist and trying out dance moves.
Is that Reed Hastings behind that sarong?
Time to make a choice, Mr. Hastings. Are you on the side of companies like Google that profit from piracy or are you on the side of your business partners who produce your original programming and the actors who make your programs come alive. Are you going to screw this up like Pandora and the National Association of Broadcasters screwed up their relations with songwriters and recording artists, or are you going to do the right thing?
Are you going to stand with those who plan for the future of Netflix or those who destroy it?
Whose side are you on?