Netflix initially billed itself as a piracy competitor. At some point, the company even used illegal download statistics as market research, to determine what shows and movies should be added to its library.
In the early days, Netflix viewed piracy as an opportunity rather than a threat. According to CEO Reed Hastings, piracy could even help to create demand for the superior streaming service, which was a good thing.
“Certainly there’s some torrenting that goes on, and that’s true around the world, but some of that just creates the demand,” Hastings said at the time.
Hastings appeared to be right as Netflix went through a period of unprecedented growth, with hundreds of millions of subscribers signing up. In the span of just a few years, Netflix became one of the largest media empires with its own content production arm.
This success story didn’t go unnoticed by the Hollywood incumbents; and that’s when things started to change.
Inspired by Netflix’s success, major Hollywood players such as Disney and HBO started their own exclusive streaming services, while Amazon and Apple also joined in. These and other companies are now fighting for the same share of household budgets that are unfortunately not unlimited.
Netflix Subscribers Decline
For the first time in its history, Netflix reported a drop in subscriber numbers yesterday. This came as a disappointment to analysts and it was a shock for the streaming service as well, which predicted modest growth during this period.
Following the announcement and a new forecast, which expects subscriber numbers to drop by two million during the second quarter, the company’s stock tanked.
There’s a variety of factors that resulted in this surprise drop. The waning pandemic likely didn’t help, nor did Netflix’s crackdown on password sharing or the decision to leave Russia. And of course, competition plays a major role as well.
Over the years, several studies, experts, opinionators, and Elon Musk suggested that the increasingly fragmented streaming landscape would only keep piracy relevant. While many households are happy to sign up for two or three subscriptions, a dozen monthly payments is often a bridge too far.
It wouldn’t surprise us if some former Netflix subscribers canceled their subscriptions and went on to pirate instead. Netflix titles are regularly listed among the most downloaded movies and TV shows on pirate sites. This is a global trend that also affects the US.
There is no reason to believe that piracy caused the drop in subscriber numbers. However, people may start to pirate Netflix shows more often after they primarily canceled the service for an unrelated reason. This is a tricky development, as new habits are easily formed.
Once people know how to get their favorite shows without paying, there are fewer incentives to resubscribe. With subscriber numbers dropping, piracy is posing a serious concern.
This isn’t news to Netflix. While Reed Hastings wasn’t worried about piracy a decade ago, the company now spends millions of dollars tackling the problem. The streaming giant joined the MPA a few years ago and is also a member of the anti-piracy coalition ACE.
In addition, Netflix also has its own in-house anti-piracy department which has been expanding steadily over the years.
The question of whether enforcement is the best answer remains. Even if piracy magically disappeared, many people still can’t afford a dozen streaming subscriptions. Perhaps the fragmented streaming landscape and subscription fatigue are the real problems?