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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 \