Netflix subscription prices in regions other than the U.S. are determined by the level of piracy in those countries, according to the company’s CFO David Wells. Netflix’s CFO suggested that it markets its services by offering them for a cheap price in the regions where piracy is quite prevalent. In other words, the greater the piracy in a given country, the lower the price one pays for subscribing to the streaming service.
The higher the piracy, the lower the subscription rate
Piracy has been around for a while, and the only way to eliminate it seems is to by to just accept that it exists and develop products and services that are far more tempting than their pirated counterparts. Thus, in an attempt to do this, Netflix is exploiting piracy to set its subscription prices in various countries. This was confirmed by Wells, who stated, “Piracy is a governor in terms of our price in high piracy markets outside the U.S.”
Another reason for evaluating piracy is that it aids Netflix in figuring out the right content to feature in different markets. Also it serves as an indicator to pick out the shows the streaming service can buy to help its growth prospects.
Strategy working for Netflix
Until now, such a strategy seems to be going well for Netflix. The company has been doing good business in countries with high piracy rates, and its user base is also growing considerably. As per the data, the streaming service saw an increase of 4.5 million users in the most recently completed quarter, which is 20% more than what was predicted by Wall Street analysts.
Further, according to a report by TorrentFreak, Netflix’s expansion has led to a substantial decrease in piracy in the countries where such illegal practice is pretty frequent.
Along with piracy, another issue Netflix has been encountering is the use of VPNs by users to access content by circumventing geographical restrictions. In regard to VPNs, the company’s CEO, Reed Hastings, opined that it is a less severe problem than piracy. The streaming company also indicated that the issue of VPNs could be tackled by making the service global, which the company has been working on with the help of its associates.