Netflix: VPN Blockade Backlash Doesn’t Hurt Us

Netflix CEO Reed Hastings says that the recent crackdown on VPN and proxy users hasn't hurt the company's results. The VPN blockade only affects a small but vocal minority, according to Hastings, and there are no signs that hordes of subscribers are abandoning ship.

netflix-logoEarlier this year Netflix announced that it would increase its efforts to block customers who circumvent geo-blockades.

As a result it has become harder to use VPN services and proxies to access Netflix content from other countries, something various movie studios have repeatedly called for.

With the application of commercial blacklist data, Netflix already blocks IP-addresses that are linked to such services, something which also affects well-intentioned customers who merely use a VPN to protect their privacy.

This has resulted in a lot of complaints from users with over 40,000 people signing a petition to lift the VPN ban. In addition, several people claim to have ended their Netflix subscriptions due to the restrictive policies, while others have suggested a return to their old pirate ways.

Some analysts predicted that the outrage might have an effect on the company’s results, but this doesn’t appear to be the case. During the presentation on the first quarter results yesterday, the VPN issue was just a small footnote.

When asked about the impact of the VPN changes on the results, Netflix CEO Reed Hastings brushed the issue aside as a minor detail that doesn’t impact the bigger picture in any way.

“It’s a very small but quite vocal minority. So it’s really inconsequential to us, as you could see in the Q1 results,” Hastings said during the earnings call.

Jumping in, Netflix CFO David Wells stressed that Netflix enjoyed very strong growth in the United States, as well as a successful global expansion. So, overall there is no sign that VPN users are abandoning ship en masse.

While the impact on the company’s revenue turns out to be insignificant, there is of course also a user satisfaction angle which could create a possible PR backlash in the longer term.

Netflix’s management doesn’t address these issues directly. However, it’s clear that hundreds of thousands of people are affected and Netflix can’t be happy with the outpouring of complaints that continues day after day.

Nonetheless, Netflix continues to address the VPN piracy issue. TorrentFreak has spoken to several VPN service providers who have seen an increase in blocking efforts over the past several weeks.

Initially Netflix used static addresses for the geo-blocking checks. As a result, proxy and VPN operators could easily bypass these checks by forwarding this traffic to a ‘clean’ IP-address. However, Netflix recently updated its detection methods and now uses hundreds of regularly changing domains.

“They are now coming from a few hundred different possible subdomains” Dave from LiquidVPN told us.

“This makes it much more expensive for us to circumvent because we would basically need to forward all Netflix traffic through our servers instead of just the packets that do the geolocation.”

Netflix previously said that, ultimately, it wants to make VPN banning obsolete by licensing all content globally. However, as long as the company still has to block access to some of its own content including House of Cards, there’s still a long way to go

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