Why Does Netflix Ban VPNs?

Why Netflix Bans Vpns

For about two years now, Netflix has banned the usage of VPNs on its streaming service, preventing users from all around the world the option to safely and securely view content through an encrypted tunnel. But why does the streaming site do this, and is there any hope for a lift on the ban in the future? Read on in our guide to find out!

Why subscribers want to use VPNs with Netflix

To start, it helps to know a little bit about why VPNs are such a helpful tool with streaming sites in the first place. This isn’t necessarily an issue that’s exclusive to Netflix; other major streaming portals like Hulu also restrict their usage.

The primary reason why a user might want to employ the services of a VPN on Netflix is of course because they want to retain their personal privacy no matter what they’re doing online - streaming or otherwise. VPNs allow you to keep your digital information safe while it’s in transit, and given that the vast majority of streaming sites require things like your credit card number, home address, and phone number when you sign up, it’s possible that a hacker listening in on your unprotected connection could easily swipe this data without your consent.

That said, there’s no ignoring the gorilla in the room when it comes to VPNs and Netflix: geoblocking. See, when Netflix decides to buy the rights for a new show, the owners of that content (whether they be a major television network like NBC or ABC, or a movie studio like Paramount and Sony), will price the content according to the country or countries that Netflix plans to display the content in.

VPNs allow users to “trick” Netflix into thinking they’re watching from one country while they actually live in another, which prevents the service from being able to accurately determine which users are consuming the content that’s localized to their region.

What is “territorial licensing”?

A good example of why Netflix wants to prevent this practice is the NBC show Community. While 5 seasons of the show were available for all UK users to view on Netflix for years, currently the only place you can find it in the US is on Netflix’s competitor Hulu. This is because during negotiations for who got to display the content in their respective countries, NBC (who owns the rights to Community and also has a majority stake in Hulu), got to charge Netflix for the right to view it in the UK since Hulu is not natively available in that country.

This is what’s known in the industry as “clipping the ticket”, wherein a rights holder (in this case NBC) will try to sell the copyright to their show in country-based chunks to a major streaming portal like Netflix. Rather than charging one flat price for the whole bundle, NBC can raise or lower the price of a show based on dozens of individual factors including (but not limited to): the population of a particular country, the number of current subscribers, and the potential customers that may sign on in that country over the next (X) years.

Territorial Licensing Copyright

To get more granular, let’s take the example of the sitcom juggernaut Friends since it’s available on both the US and UK Netflix libraries. As of 2018, Netflix currently has around 7.5 million active subscribers in the UK. Comparatively the service claims just short of 57 million subscribers in the United States. In total it was reported that Netflix spent $118 million to acquire the rights to Friends flat out, however that number also restricts which countries they can feature the show in due to the gulf in subscriber counts between the two nations.

This means it’s much cheaper for Netflix to buy a show for its UK audience than it is for the US given the number of people that could potentially watch it, which is why many US users complain that there’s “nothing on” the service these days aside from an increasing library of Netflix originals.

This is why in recent years the company has been moving away from buying the rights to shows owned by other studios and have begun dumping literal billions into developing their own content in house. It’s predicted the service will spend a whopping $8 billion on content alone in 2018. This dwarfs the paltry $2.5 billion that Hulu is expected to spend over the same amount of time, and puts the streaming service in league with studio giants like NBC, Disney and HBO-owner Time Warner, who spent $10.2 billion, $8 billion, and $7.8 billion respectively on content during 2017.

Netflix Responds to VPN Users

The company has publicly stated many different reasons for this ban, including that the loss of VPNs users was “inconsequential” to their bottom line. This sort of dismissal didn’t bode well with privacy enthusiasts, causing an uproar in the community and leading to the creation of a 40,000-strong petition calling on Netflix to reverse its decision on the matter.

Of course, like most online petitions the cry of the community was largely ignored by the streaming giant, though the fervor hasn’t gone completely unnoticed. During an earnings call in 2016, CEO of Netflix Reed Hastings responded to the controversy:

“The VPN thing is a small little asterisk compared to piracy," Hastings noted. "Piracy is really the problem around the world. 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 went on to explain what he viewed as the real enemy of a non-global content strategy: piracy.

“The basic solution is for Netflix to get global and have its content be the same all around the world so there’s no incentive to [use a VPN]," he explained. "Then we can work on the more important part which is piracy. The key thing about piracy is that some fraction of it is because [users] couldn’t get the content. That part we can fix. Some part of piracy however is because they just don’t want to pay. That’s a harder part. As an industry, we need to fix global content."

Furthermore, the Netflix social media manager responded to user on Twitter who had questions about the ban, claiming that the company was still victim to the same laws and copyright regulations that every other streaming site needs to abide by:

As for this “global Netflix” that the company keeps talking about -- it’s been about two years since the ban, and there’s still no news of Netflix using its massive bargaining power to make that dream a reality. It seems Netflix’s general idea of globalized content is simply to push the majority of its budget into producing its own shows that can be displayed globally since they own the rights exclusively, rather than trying to negotiate deals with studios on a per-country basis instead.

Wrap Up

So, even though there may not be any signs on the horizon for Netflix users to be able to watch any show they want in the Netflix library no matter where they are in the world, it’s obvious the service cares about making as much content available to as many people as they can at once.

Whether this is through better negotiations or simply dumping everything they’ve got into original content, the answer remains to be seen. But if you’re concerned about the Netflix VPN ban and want to know more about any developments as they arise, be sure to stay tuned to VPN.com for all the latest news as it hits the airwaves!