ott story_ott cover story 21/04/2015 20:35 Page 6
licensed programming from all those sources,”
he advised.
Price volatility for acquired content,
according to Sarandos, was a reflection of how
many buyers are in the market. “So we have
got a few other people into the market, there is
some value in having a larger footprint and
being able to bring more value to the
franchise, the ‘being on Netflix’ that we get to
realise in our negotiations. But I think most of
those prices, up and down, is driven by the
number of competitive buyers in the
marketplace.”
Hastings said that Netflix was “super happy
right where we are” in terms of its strategy.
“We have got a great mix of pricing plans and
options and for those who get a new 4K
television and they are excited about 4K
content, we are the leading service in the
world for 4K and that plan is a little more
expensive at $11.99. So as more 4K TV is sold,
we will get people to upgrade to the $11.99
plan. In terms of the total pricing structure,
we couldn’t be happier with the way it creates
an incredible value for the consumers. It feels
fair to them and it’s propelling our growth.”
VPN. Illegal accessing of content via the use
of VPNs in territories where it is not
operational is something that continues to
trouble Netflix, with the service changing its
terms and conditions to alert people who use
VPNs that they could be shut down from use.
discussion with the
studios on the matter,
admitting it was “kind of
a whack-a-mole” to get
ahead of the different
usage of VPNs. “The real
great news is, in the
piracy capitals of the
world Netflix is winning.
We are pushing down
piracy in those markets
by getting the access. So
the best way to really
make the VPN issue a
completely non-issue is
through global licensing
that we are continuing to
pursue with our
partners.”
David Wells, chief
financial officer, described piracy as “a
governor” in terms of Netflix’s price in high
piracy markets outside the US. “So we
wouldn’t want to come out with a high price
because there is a lot of piracy. So we have to
compete with that. So there is a little bit a
governor on our price outside the US,” he
admitted.
OBLIGATIONS. In terms of meeting ongoing
content obligations, Wells said that an
additional $3 billion to $5 billion of content
commitments over the next three years had
According to Hastings, with such VPN usage,
where someone has the money to pay for
content they want to access content, they want
to pay for that content. “So it’s certainly less
bad than piracy, but it’s not something we
encourage. It’s actually very hard to detect
because VPNs get very good at covering their
tracks for all the obvious reasons. And because
we are focused on getting global very quickly, I
think we will see this issue disappear and it
will disappear because we will be able to meet
the demand directly in all the countries,” he
predicted.
Sarandos admitted that Netflix was in
already been “baked into” Netlix’s forecast,
with Sarandos adding that as Netflix identified
the high value content, it sought to lock them
up in long-term deals. “So that does increase
our long-term obligation, but for things that we
want and to attract revenue and viewing.”
Sarandos said he was not seeing any actual
evidence at the table in terms of a reluctance of
studios to continue to sell, given Netflix’s
growing success.
“They are definitely trying to juggle the
terms of their core business versus the licence
business, but that’s true not just of us, but they
are also seeing these opportunities for
20 TV Everywhere
“Social networking sit \