Netflix, Inc. (NASDAQ:NFLX) started the year with a global bang. The streaming giant became available in over 130 countries. A few weeks later, chief content officer Ted Sarandos sanctioned Netflix’s plans to set aside $6 billion for new content in 2016. Sarandos sounded confident, “If there is too much TV, someone else is going to have to slow down…because we have big plans for 2016 and beyond.”
But for all his swagger, and the remarkable rise of Netflix the company over the past 3 years, not everyone is convinced. Bears say three big risks seem imminent – growing competition, rising costs and the firm’s over emphasis on original content. But with its entry into newer markets, a fourth threat can be added to that list – piracy.
Netflix has a Fresh Headache
Video piracy is a bigger challenge than Netflix wants to acknowledge. In most of the new markets that Netflix is venturing, free streaming of TV shows and movies is definitely not a crime. Asia is the worst “offender.” But Europe also has a bad track record on that front.
According to data from the European Commission, 56% of Europe streams content for free. Rich country, poor country, piracy is rampant and growing. It just seems that more than anything else, it’s a matter of habit.
Netflix, Inc. (NASDAQ:NFLX) is investing copious amounts of money to realize its global dreams. But those ambitions may be marred if its subscriber and revenue targets are disrupted by the menace of piracy. Can it overcome the hazard? Past record shows it can.
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Netflix Could Replicate its Brazil Model
Netflix entered Brazil in 2011 – its first venture outside of North America. And recent independent data shows that subscriptions there are soaring. This is despite the fact that Brazil is a known haven for movie piracy. A government study last year found that almost 41% of Brazilian internet users download content illegally. Not just that. Pirated DVDs are openly sold in most commercial places. So Brazil was the most unlikely of places for Netflix to be successful.
Netflix first put its anti-piracy fight to test in Brazil. And the crux of that strategy was being competitive.
“If you offer good content at low prices and rapidly – releasing series in the same moment in Brazil as people are getting them in the US…that makes piracy less enticing,” Netflix’s chief communications officer Jonathan Friedland, told BBC.
Friedland boasts that when Netflix enters a new territory, the rates of online file sharing drop. If Netflix has to achieve that in its latest markets, getting its pricing right would be the key.