The subscription service is responsible for a third of all Internet traffic during peak hours, dwarfing that of online piracy and other legal video platforms.

It’s safe to assume that Netflix is the best and most convenient alternative to piracy at this point. That is, if the service carries the movies people want to see. This appears to be a problem.

Research firm KPMG has just released a new study that looks at the online availability of the 808 most popular and critically acclaimed films. The study was commissioned by NBC Universal and praised by the MPAA, presumably to dispel the argument that many people pirate because they don’t have the option to watch some films legally.

“This first-of-its-kind report analyzed the availability of 808 different film titles over 34 major online video distribution services and found that 94 percent of the films were available on at least one service,” MPAA’s Chris Dodd commented on the study.

The MPAA is right that most of the movies are available through online stores and rental services. However, the Hollywood group conveniently ignores the lacking availability on popular subscription platforms which services such as Netflix and Hulu use.

This is not a minor oversight as the study finds that availability of top films on Netflix and other subscription services is very low.

Although KPMG decided not to mention it in the executive summary of the report, the findings show that only 16% of the films are available through on-demand subscription services (SOVD).

The above sheds a different light on the availability argument. Because, what good is it if 94 percent of the films are available online, but (at least) 84% are missing from the most-used movie service?

After all, most people prefer to get their movies in one place as it’s not very convenient to use a few dozen services to get your movie fix.

Of course this is not an excuse for people to go out and download films without permission, and we have to admit that a lot of progress has been made on the availability side in recent years. However, Hollywood can definitely learn from the music industry, where most of the popular content is available through subscription services.

From the availability point of view there’s another issue worth pointing out. The most pirated titles are usually recent releases, and these are generally not available, not even through iTunes, Amazon or rental services.

This is also illustrated in the KPMG report which shows that 100% of the top 2012 films are available online, compared to 77% of the 2013 releases. It’s probably safe to say that the majority of all pirated downloads are of films that are not yet legally available.

In other words, there’s still plenty of improvement possible.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The company claims to be a piracy killer, and previously noted that unauthorized P2P traffic reduced in countries where their services were rolled out.

Interestingly enough, the streaming service also has a lot to gain from file-sharing technologies. A recent Netflix job ad spotted by Ars Technica, reveals that they are considering using P2P technology to improve their streaming services.

“Netflix seeks a seasoned Senior Software Engineer with a special focus in peer-to-peer networks,” the company writes. The description of the new position has a clear focus on researching the possibility to allow users to stream videos via peer-to-peer technology.

- Research and architecture of large-scale peer-to-peer network technology as applicable to Netflix streaming.
- Liaise with internal client and toolkit teams to integrate P2P as an additional delivery mechanism.
- Design and develop tools for the operation of peer-to-peer enabled clients in a production environment.

Netflix mentions that the company is currently responsible for over 30% of all downstream traffic. Should it move towards P2P streaming, Netflix will also be the number one in terms of upstream bandwidth, a position currently dominated by BitTorrent traffic.

The option of P2P-assisted streaming became of interest again this year, after Netflix signed a deal with Comcast to pay for direct access to its network. With P2P technology, Netflix has the option to increase its streaming capabilities without additional bandwidth costs.

In fact, not only could the company achieve superior streaming quality by using P2P technology, its bandwidth bills could even decrease.

Bram Cohen, the inventor of BitTorrent, would welcome a P2P-powered Netflix. He previously said that video delivery via P2P is far superior to the systems currently used by Netflix and other video services.

“The fact is that by using BitTorrent it’s possible to give customers a much better experience with much less cost than has ever been possible before. It’s really not being utilized properly and that’s really unfortunate,” Cohen said.

According to Cohen, Netflix’s video streaming quality is currently less than acceptable. “I actually don’t have a TV at home myself, but I do watch stuff on Netflix and I find it very frustrating because the video quality is really terrible,” he noted.

With P2P-assisted streaming it will be possible to stream videos in a higher quality than is currently possible, but whether Netflix will use a BitTorrent-inspired technology or something different is unknown at this point.

In any case, it’s an interesting development to watch.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Australia is often criticized for its appetite for unauthorized downloading but it’s a country with a better ‘excuse’ than most for engaging in it. Not only is legal content much more expensive than in the US, the region is continually under-served, meaning that locals resort to file-sharing networks for shows such as Game of Thrones and Breaking Bad, turning Australia into a per-head piracy front-runner.

Netflix is blocked in Australia, partly because the big US studios have an exclusive deal with media giant News Corp to show content. On the Internet, however, news travels fast. Googling “netflix australia” turns up dozens of articles explaining how to circumvent the Netflix geo-blocking mechanism to (shock, horror) actually PAY to watch Netflix in Australia using VPN services and proxies.

Naturally there are no official figures on how many people watch Netflix this way but estimates range from 20,000 up to 200,000 subscribers. Highlighting how the TV networks view these people, an article this morning in News Corp-owned The Australian went as far as labeling subscribers as “pirates”, even though they are paying for the service.

“There is concern at local networks about the growing impact of the US company flouting international regulations by accepting payments from Australian credit cards, despite maintaining a geo-block that is easily bypassed by VPN manipulation or spoof IP addresses,” the paper said.

But do subscribers deserve to be called pirates when they are showing the clearest possible buying signals? In 2011, then Attorney-General Robert McClelland gave his opinion.

“In relation to the use of VPNs by Australians to access services such as Hulu and Netflix, on the limited information provided there does not appear to be an infringement of copyright law in Australia,” McClelland told The Australian, the same News Corp-owned publication now calling Aussie Netflix subscribers “pirates”.

But with Netflix not having to go to the expense of setting up in Australia in order to service the region, rivals in the same market area are also feeling uneasy.

“The studios have licensed Netflix to distribute content on particular terms in the US and other larger markets, they haven’t licensed Netflix for Australia,” said Quickflix chief executive Stephen Langsford this morning.

“I have no doubt that the studios are in discussions with Netflix about VPNs because it is blatantly in breach of terms and Netflix is essentially getting a free ride into Australia.”

Quickflix currently has around 100,000 full subscribers so if the highest estimates are to be believed, the company has potentially half the 200,000 “unauthorized” subscribers Netflix already has in Australia.

The only real solution to the situation with Netflix, VPNs, piracy and the Australian content problem is to properly service the region with legal video in a timely fashion and at a reasonable price. By now it’s a stuck record, but anything else simply won’t work.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

While unauthorized downloading is nothing new, it appears that many of these pirates still prefer the BitTorrent option even though they can watch the show for free on Netflix. And we’re not talking about trivial numbers here.

News Corp CEO Robert Thomson estimated that no less than 20% of all Foxtel subscribers who already paid for access to the show chose to pirate it instead. With other popular shows such as Breaking Bad a similar pattern emerges.

According to Bram Cohen, the inventor of BitTorrent and chief scientist of the similarly named company, this doesn’t come as a surprise. Talking with the BBC’s Click, Cohen notes that in terms of video delivery BitTorrent is far superior to the systems currently used by Netflix and other video services.

“The fact is that by using BitTorrent it’s possible to give customers a much better experience with much less cost than has ever been possible before. It’s really not being utilized properly and that’s really unfortunate,” Cohen says.

BitTorrent’s inventor says he doesn’t own a TV at home, but he does watch Netflix on occasion. However, not with too much pleasure as the video quality that’s offered by the streaming service is less than acceptable.

“I actually don’t have a TV at home myself, but I do watch stuff on Netflix and I find it very frustrating because the video quality is really terrible,” Cohen says.

Cohen believes that many pirates share similar frustrations, which may explain why so many people pirate video content via BitTorrent, even those who have a Netflix account and can watch it legally. In fact, if he wasn’t such a prominent figure he probably be a pirate himself.

“I really go out of my way to not do the slightest hint of pirating anything ever, but if I were just some nobody [...] I would probably pirate some of the stuff that I can watch on Netflix and already paid for, because I’d like to watch it in higher resolution.”

Moving on to the legal aspects of piracy, Cohen doesn’t believe that copyright infringement is a crime that’s on par with manslaughter or shoplifting, but stops short of explaining exactly what it is.

“Copyright infringement is not a crime in the way that beating up someone is a crime, or stealing an actual physical good form a store is a crime. It’s something else.”

Looking at the future, Cohen says he eventually hopes to be remembered for more than just creating one of the most disruptive technologies for the entertainment industries. According to him there are more important things he can delve into, including power generation and 3D printing.

“I don’t think my work is done,” Cohen says.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

However, these pirate sites also offer Netflix valuable information as to what video content they should acquire for their service.

This week Netflix rolled out its service in the Netherlands and the company’s Vice President of Content Acquisition, Kelly Merryman, says that their offering is partly based on what shows do well on BitTorrent networks and other pirate sites.

“With the purchase of series, we look at what does well on piracy sites,” Merryman told Tweakers.

One of the shows that Netflix acquired the rights to in the Netherlands is Prison Break, since it is heavily pirated locally. “Prison Break is exceptionally popular on piracy sites,” Merryman says.

In a separate interview Netflix CEO Reed Hastings adds that his company is aware of the many people who download content without permission via torrent sites. However, this is not exclusively a bad thing, as it also creates demand for the content Netflix is offering.

“Certainly there’s some torrenting that goes on, and that’s true around the world, but some of that just creates the demand,” Hastings says.

Eventually these BitTorrent users may want to switch to Netflix as it’s a much better user experience than torrenting, according to the CEO.

“Netflix is so much easier than torrenting. You don’t have to deal with files, you don’t have to download them and move them around. You just click and watch,” Hastings says.

One goal of Netflix is to convert people who currently use pirate sites to get their fix, and there is some evidence that this is indeed happening. According to Hastings, there is evidence that BitTorrent traffic in Canada dropped 50% after Netflix started there three years ago.

The real challenge for the streaming service is to license as much content as they can, which is easier said than done. It might not be a coincidence that “Game of Thrones” is the most pirated TV-show. After all, Netflix wasn’t able to buy the rights from HBO no matter what they offered.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The above is an argument often heard in defense of piracy. In theory it makes sense, but when Netflix released the entire season of the revived cult series Arrested Development this Sunday, something strange happened.

Tens of thousands of pirates lined up to grab a copy from various torrent sites. Many came from the U.S. and other countries where people only have to sign up for a free Netflix account to watch the show.

TorrentFreak tracked the download numbers for the various episodes and season bundles and found some interesting results.

During the first two days, episode one of Arrested Development topped 175,000 downloads on public BitTorrent trackers. A decent number, but one that pales in comparison to records set by Game of Thrones and other hit series.

Unfortunately the download figures by themselves are meaningless without context, so it’s hard to draw conclusions on how the Netflix release affected them. From past experience, however, it is safe to say that the numbers would be significantly higher if a show had been released on a premium cable network.

After all, in countries where Netflix is available people have little reason to pirate the show. Or do they?

Looking at a sample of the geographical locations of the pirates we see that the United States comes out on top with 18%. Other countries where Netflix is available, such as Canada (11.8%), United Kingdom (5.6%) and Sweden (3.5%) are also high on the list. In fact, Australia is the only non-Netflix country in the top five.

While it’s easy to conclude that this proves that these “pirates” are just cheap thieves, the reality is a bit more complicated. For one, it could be that the download numbers would have been exponentially higher if Arrested Development hadn’t been made so widely available.

On the other hand, it also appears that not all of those who choose to pirate Arrested Development do so because they are unwilling to pay for a Netflix subscription.

Looking at the comment section of a popular TV-tracker there are plenty of comments on the issue. One downloader comes in with the stereotypical response, saying that he just “wasted” $8 on a Netflix subscription. However, there are many who disagree with this view.

One commenter notes:

“I certainly don’t see it as wasted. I’m fully supportive of Netflix for what they are trying to achieve. They’ll have my $8 regardless of whether I use it or not.”

Another one adds:

“You didn’t waste $8, you proved that Arrested Development was worth funding for a fourth season. And you got to see it slightly sooner, which is totally worth it.”

The above comments are among many suggesting that even those who have a Netflix subscription may still download the episodes through BitTorrent sites.

In part this is out of habit as that is how many people have enjoyed TV-shows for many years. The comment below from a Swedish downloader shows that pirate habits are sometimes fueled by unusual situations.

“I have a Swedish Netflix account, but for some stupid reason the PS3 app won’t let me turn the subtitles off. I can choose between Swedish, Finnish etc subtitles but there’s no option to turn them off completely. So here I am downloading the episodes, even though I have Netflix, just to watch without subtitles.”

Of course there are also many downloaders who turn to unauthorized sources because Netflix is not available in their country, as is the case in Australia, which has the highest piracy rate per capita.

In an open letter, the Australian consumer advocacy organization Choice recently asked Netflix to open up shop down under, so Aussie fans can watch their shows legally. Netflix is receptive to these comments and told PaidContent that it’s “busily expanding” into new markets.

According to one commenter on a torrent site, the potential for new customers is certainly there.

“I would have paid for a month if they were available in my country just to show appreciation for Arrested Development and their great business model but hey…”

The above lays out some of the challenges faced today by TV-producers old and new. There is a huge demand for TV content but at the same time people’s viewing habits are rapidly changing.

All in all Netflix has to be applauded for their efforts to innovate. The lack of windowing and on-demand availability will certainly have an impact on piracy rates, although it may take a while for some to convert, even those who already pay for Netflix.

If the conditions are right, however, old patterns will eventually change.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

That’s quite an achievement, especially when taking into consideration that streaming Hollywood blockbusters was virtually impossible half a decade ago.

Furthermore, with the rise of these legal options people have less incentive to search for pirated copies on file-sharing sites – two years ago we noted that Netflix was killing (unauthorized) BitTorrent traffic. Now Netflix’s Chief Content Officer Ted Sarandos reports he has some evidence to back up this claim.

In a recent interview with Stuff, Sarandos notes that BitTorrent traffic dips every time the video provider opens up shop in a new location.

“One of the things is we get ISPs to publicise their connection speeds – and when we launch in a territory the BitTorrent traffic drops as the Netflix traffic grows. So I think people do want a great experience and they want access – people are mostly honest.”

In other words, many people who previously pirated movies via BitTorrent stop doing so when Netflix becomes available. Choice is also the key to solving the piracy problem according to the Netflix CCO.

“The best way to combat piracy isn’t legislatively or criminally but by giving good options,” Sarandos says.

It’s not rocket science and quite logical to most, but still there are many parts of the world where movie and TV streaming options are rather limited. Even in the United States some releases are held back or delayed to save old business models.

According to Sarandos this has to change – people want to consume Hollywood content and need legal options to do so.

“One of the side effects of growth of content is an expectation to have access to it. You can’t use the Internet as a marketing vehicle and then not as a delivery vehicle,” he says.

There’s still a lot can be done to improve the current situation. Since the launch of Netflix’s streaming service in 2008, BitTorrent traffic has continued to rise in the United States, but it’s indicative that Game of Thrones is one of the most pirated titles of all time.

After all, HBO is not making it easy for people to access the show and Netflix is unable to buy it.

Of course, there are many reasons why people pirate and there will always be freeloaders who simply can’t or won’t pay. But this is no reason to offend those who have the right intentions.

Making content available may not make piracy disappear, but at the very minimum it gives the millions of people who want to pay a place to spend their money.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Their fansubs have been downloaded 26 million times over the years and are generally used with pirated TV-shows and movies. However, during the past few days the hobbyist group got the ultimate recognition from an unlikely corner.

This week Netflix debuted its movie streaming service in Finland, but not without making a rather embarrassing ‘mistake’.

Instead of displaying official Finnish subtitles, Netflix was caught using DivX Finland’s fansubs on the Canadian-American science fiction series Andromeda. It’s possible that Netflix made this same ‘error’ for other TV-shows and movies as well.

DivX Finland was quickly alerted to this atypical usage of their work and the group jokingly noted on Twitter that Netflix never asked for permission to use the subtitles.

“It’s nice to see that the texts are used, but they did not ask permission,” they wrote, adding a link a clip from the Netflix video where DivX Finland’s credits are clearly visible.

Responding to the mishap, Netflix apologized for the use of the unauthorized subtitles and assured the Finnish newspaper HS that they will be taken offline. Netflix did not explain how they ended up there to begin with.

DivX Finland member Jarmo Hakala tried to reach Netflix to discuss the use of “their” subtitles, but he has yet to receive a response from the company.

This is not the first time that fansubs have been controversially used in official programming. Last year footage from the dubbing room of the American anime distributor Funimation revealed how the company was also using ‘pirated’ subtitles.

Apparently some elements from this “pirate” subculture can also be of use to copyright holders, when it suits them.

Update: In a comment on the issue Netflix told TorrentFreak the following:

“We buy movies and TV shows from many different distributors. Generally they provide the subtitles. We’re investigating how these subtitles were added to Andromeda.”

“We have removed the series from Netflix pending the investigation. We are a legitimate service and pay a lot of money for the TV programs and movies on Netflix, including subtitles.”

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Luckily for Hollywood, many Americans choose to consume their online media through legal services such as Netflix. In fact, there are now so many that the total Internet traffic generated by Netflix has outgrown that of BitTorrent.

This made us wonder – what would happen if all movie-downloading BitTorrent users made the switch to Netflix? What if movie piracy via BitTorrent disappeared?

Before we crunch some numbers we have to say that the model we use relies on a lot of assumptions. However, we try to keep these in favor of the movie industry to maximize their potential ‘profits’. We obviously chose Netflix as a BitTorrent replacement because it comes closest to what ‘pirates’ want.

What’s the ‘value’ of BitTorrent piracy?

What we’re going to do is determine the amount of Internet traffic movie and TV related BitTorrent downloads generate in the US. Since the file-sizes of Netflix and BitTorrent downloads are about the same, we then compare this traffic to what Netflix is generating now. Assuming a linear relation between revenue and traffic we can then “guess” how much extra money would come in if all BitTorrent users switched – and paid.

Step 1: How much BitTorrent traffic is movie/tv related?

The first assumption we’re going to make is that all BitTorrent traffic is unauthorized. This is of course not the case, but we’ll leave that debate for another time.

If we then take a look at one of the more recent reports on the BitTorrent ecosystem, often cited by the MPAA, we see that 35.2% of all torrents are movie related. Another 12.7% are TV-related. For the purpose of this thought experiment we are going to forget about Hulu and other free services and add TV to the ‘pirate traffic’ mix.

The total percentage of video torrents is then 47.9%.

Since we’re comparing traffic we have to adjust for the file-size of videos compared to all other content on BitTorrent and the actual popularity of the files. This is nearly impossible to estimate precisely , but several reports show that movie and video are downloaded the most by far. So we’re going to set the total amount of infringing BitTorrent video traffic at 85%, which is probably on the high end.

Step 2: How does BitTorrent traffic compare to Netflix traffic?

The next step is to see how much of total Internet traffic 85% of all BitTorrent traffic actually is.

A recent report from the Canadian company Sandvine shows that in the US 16.5% of total Internet traffic on an average day comes from BitTorrent. Since BitTorrent traffic goes both ways (upload and download), 8.75% of this is downstream traffic. This means that a little under 7.5% (85% of 8.75) of all Internet traffic in the US is video downloads over BitTorrent.

The same Sandvine report shows that 23.3% of total Internet traffic an average day comes from Netflix. More than 95% of this traffic is downstream, so we can set Netflix downloads at approximately 22.5% of all US Internet traffic, which is three times as much as BitTorrent’s video download traffic.

Step 3: How much revenue would these pirates generate on Netflix?

Here comes the interesting part. What would it mean in terms of revenue if ALL BitTorrent traffic moved to Netflix?

If we assume that BitTorrent and Netflix users consume roughly the same amount of content (again an assumption favoring the movie studios), then this is an easy calculation. Netflix would generate a third more revenue. Based on the shareholders report of the last quarter of 2010 (where most of the torrent stats in this article are based on) this translates into $198 million additional revenue for Netflix.

Based on more recent stats contained in Netflix’s third quarter filing of this year, the increase in revenue would be $266 million for that quarter.

Step 4: How rich would Hollywood become?

It’s clear that according to our (very unrealistic) calculations Netflix would greatly benefit from the sudden disappearance of BitTorrent piracy. The next step is to see how Hollywood would be impacted. Since most licensing deals are fixed and not based on usage, one could argue that the movie studios wouldn’t benefit at all. However, that’s not much fun.

So let’s look at the licensing deals that were in place already and determine Hollywood’s added profits based on that, assuming they would be more flexible.

In the whole of 2010, Netflix paid the movie studios $181 million in licensing fees according to the shareholder reports. If we add a third to that, Hollywood would have “made” roughly $60 million extra. Salient detail, the yearly budget of the MPAA is higher than that.

In recent months the movie studios have exponentially increased Netflix’s licensing costs, but still the added profits for the movie studios will be nowhere near a billion dollars. No, getting rid of ALL BitTorrent movie and TV piracy appears to have a ‘relatively’ small effect, even if all pirating BitTorrent users signed up for a Netflix account.

What does this mean?

Nothing. It’s a simplistic attempt to put a number on BitTorrent piracy in the US.

It shows that even when you assume that 90% of all US BitTorrent traffic is dedicated to video piracy, the added revenue for Hollywood in 2010 would have been less than the amount they paid to the MPAA. That is, if all BitTorrent users switched to Netflix.

The real added revenue if BitTorrent disappeared would of course be a fraction of this, as not everyone would start paying.

We don’t want to draw too many conclusions on this simple thought experiment, but it’s something to consider, especially when ISPs are expected to dedicate millions of dollars in resources to send BitTorrent users warning letters early next year. Not to mention the negative effect of the censorship bills that have been proposed recently.

Is it really worth all that?

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

In the years that followed the Internet traffic distribution underwent a metamorphosis, as video streaming took off with the launch of YouTube and later Netflix. However, all this time BitTorrent remained a significant player and new data confirms that this is still the case.

Sandvine, the company that’s best known for manufacturing the hardware that slowed down BitTorrent users on Comcast, has released their latest Internet traffic report. The report highlights several emerging trends in Internet traffic consumption in North America.

Netflix is by far the most bandwidth-consuming source of traffic. On an average day, 23.3% of all North American traffic comes from or goes to Netflix. BitTorrent is a good second with 16.5% of the traffic pie, meaning that Netflix and BitTorrent together account for almost 40% of all traffic.

The main difference between BitTorrent and Netflix traffic is that the former is more spread out over the day, as BitTorrent users continue downloading overnight.

The graph below shows the usage of various types of traffic during peak hours, where BitTorrent takes up nearly half of all upstream bandwidth. Netflix is the absolute king in terms of downstream traffic here, accounting for nearly one third of all traffic during peak hours.

The data further shows that BitTorrent is the last major P2P network standing. After LimeWire was shut down exactly one year ago, major traffic to and from the Gnutella network vanished completely. Last year it was responsible for 11% of upstream traffic and 2% of downstream traffic during peak hours. In October 2011 it is no longer present among the top 10 traffic sources.

Interestingly enough, none of the popular file-hosting services generates enough traffic to make it into the top 10 in North America. However, the report shows that this is quite the opposite in Brazil, where a massive 9.45% of all traffic during peak hours goes through Megaupload, and another 1.97% through its sister site Megavideo.

Both Megavideo and Megaupload are also listed in the top 10 in Africa with 2.33% and 3.11% respectively. Other regional differences that stand out include Google Video being twice as popular than YouTube in Eastern Europe. In Brazil on the other hand, YouTube is generating nearly a quarter of all Internet traffic during peak hours.

While keeping in mind that Sandvine might benefit from overestimating the percentage of P2P traffic because they sell traffic shaping applications, the above shows that BitTorrent is still a major player on the internet in terms of the traffic it generates. But the question is for how long.

The rise of Netflix in North America – despite negative results earlier this week – shows that there is plenty of interest in paid entertainment. Combined with the traffic stats above it is fair to assume that many more people pay for movies than those who download. For Hollywood this leads to the disappointing conclusion that even if all movie pirating BitTorrent users got a Netflix account, the effect on the movie industry’s revenues would only be ‘marginal’.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.