Netflix Battles Illegal Streaming

Netflix became prominent when the physical DVD and video rental industry went kaput. Blockbuster, once the unquestioned champion of the video rental game, suddenly lost its customer base and filed for bankruptcy in 2010. Netflix played a major part in Blockbuster's demise, when it began sending DVDs by mail to clients in the United States. Customers no longer had to pay late fees for failing to make it to the video store on time. Then came online streaming, which sealed Blockbuster’s fate, seemingly overnight. Netflix went on to acquire an extensive library of television shows and movies. Now, people all over the world rely on the service for their viewing entertainment.

The Challenge For Netflix

The problem for Netflix is that it became a victim of its own success. Other sites began streaming video as well. Since most movies and television shows are in a digital format, it is quite simple to capture, copy and disseminate the material. One would assume that Netflix could under charge these sites, in the manner of Wal-Mart, and then slowly raise its prices to sustain its profits once the competition is gone. Yet, doing so is impossible because many illegal streaming sites are free. They make their money from the clicks that generate advertising revenue.

Orange is the New Black as an Example of the Problem

Meanwhile, things have gotten better, and worse, for the online video giant. The success of its platform became clear when it began producing original shows, such as Orange is the New Black. Many fans often go straight to Netflix, without even turning on the traditional television anymore. These online shows are racier than regular television and can broach subject matter often impossible on the censored commercial airwaves.

Orange is the New Black is a critical and commercial success. Fans await the new episodes with eagerness and critics laud its storylines. Nevertheless, illegal streaming sites continue to proliferate like wildfires. The danger for the company is that new releases, such as the Orange season-openers, are available on the pirate sites almost immediately after the initial airing on Netflix. Consumers have only to wait a few hours, in some cases, to watch what would otherwise cost them money. For many, it is a no brainer to go for the free option.

Financial Losses

Things are getting worse for the legitimate online streamer. Revenue losses have resulted in the need to raise rates. Consequently, in a sort of vicious cycle, even more consumers drop the service. At a corporate earnings call, Netflix executives conceded that a recent price hike from $10 to $16, for a combo package, resulted in a large number of subscriber cancellations.

What Can Netflix Do?

It is not clear just what Netflix can do to ensure its share of the streaming market. Though the service has an impressive video library, there are limits to what it owns. In contrast, computer users can download virtually any title they want on the internet, albeit illegally in many cases. One advantage that Netflix has is that its legal downloads are usually faster than the bit torrent sharing of illegal files. However, it seems, for many, the free price of the secondary sites outweighs the inconvenience of waiting for a download.

So serious are things in this industry that Netflix actually mentions illegal streaming sites in its official list of competitors, just as Blockbuster once did with Netflix.

In the always-evolving world of entertainment, Netflix has been both the beneficiary and, now, victim of technological advances. It remains to be seen just what the company will do to maintain its current dominance. One thing is sure, Netflix is in a battle that it must win to survive.