Netflix Uses Piracy Sites to Determine Which Shows to Buy — It’s Not as Crazy as You Think

/ Sep 15, 2013

netflix netherlands

Before you settle in to watch “Breaking Bad,” or Niners/Seahawks, or “The Newsroom” season finale, or Mariano Rivera’s last game at Fenway, tonight — seriously, it is a great day for watching TV — here is something interesting you might have missed about a company that is either hurting or helping the TV industry, depending on which TV network you ask.

In an interview with Dutch website Tweakers, Netflix’s VP of content acquisition Kelly Merryman said that Netflix determines which shows and movies to buy at least in part by looking at what is being heavily downloaded on BitTorrent networks and other piracy sites. “With the purchase of series, we look at what does well on piracy sites,” Merryman is quoted as saying to Tweakers by TorrentFreak.

It’s an eye-opening statement for sure, especially considering how most comments from the TV industry (which, yes, Netflix is a part of) about BitTorrent and piracy usually involves some sort of scorched-earth, burn-them-all-to-the-ground, policy measure. Here, Merryman is openly acknowledging the value of such sites to her company, which, remember, is still primarily a hub for people to watch and catch up on TV shows that actually air on TV.

In other words, it shouldn’t be too surprising that Netflix is resourceful enough to use services like BitTorrent as part of its acquisitions strategy. The idea is pretty obvious if you go through it piece by piece:

  1. Content licensing fees are getting higher every day
  2. Other companies are launching competitive streaming services
  3. Sometimes this means Netflix needs to offer shows on an exclusive basis, which raise fees even more
  4. Therefore, Netflix has to be careful about which shows it decides to license, especially if it’s on an exclusive basis
  5. People who download shows from piracy sites do so because they love those shows and are unable to watch them on TV
  6. If a lot of people are downloading a particular show in a particular region, it’s safe to say there is a strong market for that show in that region
  7. So if Netflix is able to offer that show, as well as a lot of other shows, all at a relatively low price, well, we’ve now arrived at the Netflix business model

Again, it feels very obvious if you think about it for longer than two seconds (which I just did). With Netflix’s recent launch in the Netherlands, Merryman said she saw that the old Fox show, “Prison Break,” is really popular in the country. Therefore, Netflix has acquired the rights to stream the show so the Dutch can watch it in a legally permissible way.

What would make this even more interesting is if Netflix starts to use a similar strategy to determine which shows it greenlights as new original programming. Netflix content chief Ted Sarandos has said before how Netflix’s decision to pick up “House of Cards” was relatively easy because the company had data that indicated its audience would watch a political drama.

What if the company used external data from, yes, piracy sites, along with its own internal data to inform its original content strategy? Wouldn’t these shows be more likely to be a hit with its viewers? Wouldn’t it accelerate the number of people who choose to sign up for the streaming service? Once again, it doesn’t sound that crazy, right?

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