Netflix should cut prices to beat piracy, study finds

Should Netflix offer more content for less money? Photo / 123RF

You would have to be a fool to think the war against piracy is nothing more than a complicated game of whack-a-mole.

The general approach to curb piracy often involves rights owners sending take-down requests or blocking piracy sites, however the problem is others appear in their place just as fast.

Netflix is one such company fighting pirates, with the streaming giant having sent more than a million take-down requests to Google alone, news.com.au reports.

Last year, Netflix also started blocking Aussie subscribers from using geo-dodging technology to access the catalogue of different countries.

However, a new study claims these efforts are in vain, with the only way for Netflix to compete with pirates to have the streaming service cut its prices by more than half and to offer a large catalogue of content similar to what is offered in the United States.

The study set out to analyse the effects of subscription streaming services on piracy by giving thousands of BitTorrent users free access to a streaming service for 45 days.

Researchers then monitored the legal viewing activity and BitTorrent transfers of the people who received the free offer, comparing it with a control group.

What they discovered was subscribers who received the free subscription watched more TV, but didn't change their torrenting habits all that much.

"We find that, on average, households that received the gift increased overall TV consumption by 4.6 per cent and reduced internet downloads and uploads by 4.2 per cent and 4.5 per cent, respectively.

"However, and also on average, treated households did not change their likelihood of using BitTorrent during the experiment," the report read.

One of the main reasons pirates gave for not changing their torrenting behaviour was they couldn't find all of the content they wanted to watch on the streaming service they were gifted.

"Households with preferences aligned with the gifted content reduced their probability of using BitTorrent during the experiment by 18 per cent and decreased their amount of upload traffic by 45 per cent," the report read.

Researchers also found the cost of these services would need to be drastically reduced if Netflix was to beat piracy.

"We estimate that households in our sample are willing to pay at most $3.25 USD (NZ$4.45) per month to access a SVoD catalogue as large as Netflix's in the United States," the report said.

With the basic package in Australia costing $A9.99 (NZ$11.04) per month, the company would have to reduce its pricing structure by more than half to meet this, which seems highly unlikely.

"Together, our results show that, as a stand-alone strategy, using legal SVoD to curtail piracy will require, at the minimum, offering content much earlier and at much lower prices than those currently offered in the marketplace, changes that are likely to reduce industry revenue and that may damage overall incentives to produce new content while, at the same time, curbing only a small share of piracy," the researchers conclude.