Netflix's VPN Problem

Netflix are cracking down on cyber-crime.
Part of the beauty—or ugliness, depending on who you ask—of the digital economy is that the gatekeepers of content are losing power. Such is the case with Netflix and the various license holders whose content the site hosts. Having just expanded to 190 countries worldwide, Netflix has certainly risen to a position of pre-eminence as the primary provider of streaming services worldwide. However, alongside the company’s expansion, its users have figured out ways of maximizing what’s being offered to them.
If, for example, a user in the UK notices they can’t watch any Star Wars content on their Netflix account (because CBS has not yet granted the license to Netflix to distribute that title in that country), but they know their cousin in the US can, all they have to do is enlist the service of a VPN encryption plugin. A “Virtual Private Network” allows a user to appear as though their IP address is in a different country. Popular providers like Hola and HideMyAss provide varying degrees of this service both for free or for payment. When used in conjunction with a Netflix subscription, it essentially means account holders can embark on “global Netflix content tourism,” as one blogger aptly put it, and sample the offerings of every territory around the world just by toggling some settings.
This, of course, does not make happy license holders. They want Netflix to have to pay to distribute Star Wars in the UK and the US, not allow savvy users to access the offerings of every country at once. In response to this, Netflix recently announced in a blog on its website that it would be cracking down on VPN users and would essentially block content that it deems as being watched “out of region”. It will do this by setting up blacklists of servers that host these VPNs, as well as other unspecified techniques.
The somewhat blandly titled post, “Evolving Proxy Detection as a Global Service”, stipulated that “some members use proxies or “unblockers” to access titles available outside their territory. To address this, we employ the same or similar measures other firms do. This technology continues to evolve and we are evolving with it. That means that in the coming weeks, those using proxies and unblockers will only be able to access the service in the country where they currently are.”
This, of course, unleashed a wave of unhappy geeks online, as well as statements from VPN companies who promised that they who find workarounds to the new restrictions. It remains somewhat unclear if these workarounds will be effective.
As the future of VPNs is in question after Netflix’s move, it’s worth asking: why is the company doing this at the risk of angering their usership? With a global usership that amounts to a staggering 75 million, it appears that the company is not worried that this move will affect their number of users.
In a call with investors after the announcement, Netflix CEO Reed Hastings said that the decision was made to be in the best interest of license holders, not users: “You can call it placating—you can call it catering to their desires. You know, they have legitimate desires,” Hastings said of content owners. “If we license content in Canada, it’s not fair for us or for our customers [who are outside of Canada] to be getting that if we’ve only paid for Canada.”
However, some critics and insiders say the company is simply grand-standing, as trying to find and block every proxy server out there would amount to a never-ending game of whack-a-mole, which would require more and more resources, and is essentially an unrealistic goal.
Though the resolution of the debacle remains to be seen, one thing is for sure: you can be a mega company with millions of users, but geeks on the internet will always be searching for a way to stay one step ahead. It will be interesting to see who wins.