August 8, 2011 • History Factory
By Anthony Crews
I didn’t see it, but they said she was led from her dorm room in cuffs, leaving behind the treasure chest of illegally downloaded music, movies, and TV shows for which she had been detained. It could have been me. I had been pirating media for years in college through services like Kazaa and a DC++ file–sharing community on campus. Napster was fighting for its life while I was in high school. I had been assigned the topic of music piracy during a debate—I won, but don’t remember for which position—so I was aware of the issue. Whatever the facts, it didn’t feel illegal. The arrest of a fellow student might have stopped me. It didn’t. I ultimately tired of peer-to-peer file sharing for other reasons: big media files devoured computer memory, their quality was a crapshoot, and they brought viruses.
Farhad Manjoo, Slate’s tech columnist, kept to those old habits for years. His piracy was grander and longer-lived than mine ever was, but he is now a self-described “reformed pirate.” Manjoo was once a frequent user of BitTorrent, a movie file–sharing site that has typically dominated global Internet bandwidth. That is, until last spring.
Netflix made big news in March when broadband company Sandvine reported that during peak hours Netflix used about one-third of all Internet traffic, making it the single-largest source of overall traffic, surpassing illegal file sharing for the first time…ever. This came on the heels of news that Netflix will create its own original programming, allegedly outbidding giants HBO and AMC, lately the sources of the best programming in TV’s new Golden Age, to produce a David Fincher–directed drama starring Kevin Spacey.
Netflix launched in response to a broken system. Its co-founder Reed Hastings, faced with a $40 late fee from a VHS copy of Apollo 13 that he didn’t want to tell his wife about, decided to create something better. Within two years, the flat fee/no due date/free shipping model that exists in the company today was in place. Once it was created, the company’s streaming service led the industry.
In a recent article, Manjoo describes how that service dissuaded him from pirating movies. By his measure, Netflix was cheap enough with a good enough selection of titles, and the service worked terrifically. But his conversion boiled down to one factor: “Piracy requires work. Netflix doesn’t.” Here Netflix should be applauded for doing something important—convincing consumers to pay for something they could otherwise get for free.
That’s not exactly a new concept in business history, and is reminiscent of the struggle between cable and broadcast television. The old guard doubted consumers would pay for content on cable when network programming was free. It wasn’t until the live broadcast of the Thrilla in Manila in 1975 and the subsequent rise of HBO and MTV that cable planted deeper roots.
The latest Netflix news might seem less encouraging. After a 60 percent price increase to their basic package, customers have been in an uproar. Many have dropped some or all of Netflix’s services. Its competitors are offering discounts to switch. One recent report finds that Netflix’s brand perception has plummeted below lowly Blockbuster.
Speaking as an historian and Netflix apologist, some perspective is needed. We learned from the rise of cable that people will pay for quality, easily accessible entertainment despite free alternatives. And the music business learned, despite its resistance, that consumers will have their media digitized whether an industry likes it or not. Netflix has a framework for even greater success, not least because you can watch it on almost any platform. The ongoing popularity of BitTorrent indicates latent demand for the kinds of services Netflix strives to offer—more, better, newer entertainment. While the film industry continues to struggle, it may be more eager to strike deals and improve Netflix’s overall library, the kind of improvement that might stop pirate dabblers like Manjoo from relapsing and more consumers to go legit.
In the early 19th century the United States issued letters of marque to U.S. merchant ships, granting them license to arm themselves and attack foreign ships. The government would then take a cut from the sale of plunder. Piracy, in effect, was legalized and made profitable. Many companies since have followed the same principle, creating a legitimate business where only illicit demand existed. Netflix is the latest of these. Sadly, before its rise, a lone college girl in Ohio had to walk the plank.