Piracy sites help Netflix to decide what shows to purchase

Netflix has begun its official rollout in the Netherlands. The company’s primary goal is to amass a substantial user base, similar to what it has in the United States. As a result, the Netflix team needs to assess what its viewers want to watch; and one such strategy is to monitor a show’s popularity on piracy sites.

According to TorrentFreak, Netflix understands that pirate sites are quite possibly their biggest competitor. After all, people have no need to subscribe to a streaming service when identical content is freely available on the web. But those looking for a legal alternative certainly appreciate the convenience Netflix provides.

“Netflix is so much easier than torrenting. You don’t have to deal with files, you don’t have to download them and move them around. You just click and watch,” explained Netflix CEO Reed Hastings.

So when Netflix is shopping around for a new series to pick-up, they take a look at what’s popular on local BitTorrent networks. For example, Netflix recently bought the rights to Prison Break; a series which Kelly Merryman, VP of Content Acquisition, says is “exceptionally popular on piracy sites.”

Although pirate sites might initially be considered Netflix’s main rival, they’re also potentially keeping them afloat. Not only does illegal content create demand for better quality content, but it puts television networks in a difficult spot. Fully knowing that users can simply download their programs for free, it’s sometimes better for the cable company to strike a deal with an established streaming service, even if its profits are undercut by the middleman.

That being said, Netflix doesn’t exactly have an easy time trying to secure licensing rights, either. For instance, even though Game of Thrones is currently the most pirated TV show on the planet, HBO refuses to relinquish any of its rights to Netflix.

Either way you look at it, the impact that Netflix has had on the pirating industry is profound. After launching the service to Canada just three years ago, the nation’s BitTorrent traffic has dropped by an astounding 50%. It’ll be interesting to see if Netflix can recreate these results in the Netherlands and beyond.

Netflix CEO gets $1.5 million pay cut, stocks remain low

Netflix CEO, Reed Hastings, got a lump of coal this Christmas as the company's board chose to halve his stock options. Hastings has been at the helm while mismanagement of the company is widely attributed to the exodus of both subscribers and stock holders. Despite losing roughly $1.5 million from the decision, he will maintain his $500,000 base salary. 

Although it had a strong start in 2011, Netflix's stock price plummeted this summer and continued to fall for the course of several months. Once soaring to its peak of about $300 per share, stocks began to dive after a series of missteps left the company slack-jawed and investors disappointed.

A price hike set the stage for Netflix's decline earlier this year, creating unintentional animosity between the company and its less forgiving subscribers. The increase was purportedly aimed at helping Netflix cover the costs of producing its own original content, a la HBO, and maintain deals with content companies. Customers began leaving.

Shortly afterward, Hastings announced that he had listened to numerous customer complaints. Netflix attempted to deftly maneuver its subscriber's heartstrings as the CEO offered both a sincere apology and a solution to the problem. In order to give subscribers lower rates, he reasoned, the company needed to keep its costs down. Netflix decided it would be spinning off its costly, by-mail movie rental service into a separate enterprise named Qwikster. This puzzling brand name became the butt of jokes for every late night comedy show. The bold move was pitched as an earnest one, though.

Customers were less than thrilled about being forced to maintain two subscriptions with two separate companies if they wanted to enjoy both streaming and by-mail options. This time, investors spoke up and stock prices began to fall rapidly. 

After about a month of generating ill-will toward Netflix, Qwikster was scrapped and more apologies were made. Fast forward a bit and subscribers find that Netflix lost its deal with Starz (and Showtime), a major source of its newest, mainstream movie content. Netflix announced a deal with Dreamworks right before the Qwikster fiasco but the deal will not bear fruit until 2013.

This seems to be a particularly scary time for Netflix. HBO Go is picking up steam, Starz has announced plans to stream its own content and stock holders have definitely lost confidence in Netflix's direction and leadership. Despite the circumstances though, Hastings announced he intends to repair the image of the company "brick by brick" and suggests we'll see a stronger Netflix in 2012

Biggest tech failures of 2011

 

There are always valuable lessons to be learned from failures -- and boy has 2011 been a pedagogic year for some tech companies. Sony, for example, has no doubt learned about the importance of securing its network infrastructure, especially when it holds the information of millions of customers. And in the event that something goes wrong again they now know it's better to come clean sooner rather than later.

Netflix and HP probably learned a thing or two about about communicating with their customers as well. The first tried and failed to split its business in two, and announced a 60% price increase for streaming and DVD-by-mail customers, while HP alienated partners and shook customer confidence when it announced it was halting its webOS projects and possibly exiting the consumer PC market.

We could go on for a while listing Research In Motion's recent mishaps, or the back and forth patent battles in the mobile sector headed by Apple versus Samsung and Microsoft versus every Android manufacturer. Some were also dissapointed by the iPhone 5's no-show -- though the 4S is a huge sales success -- and in general 2011 was something of a failure for any tablet manufacturer that wasn’t Apple and maybe Amazon.

What about Google's Chromebooks? Was the decade long wait for Duke Nukem Forever worth it? Cast your vote in the poll below and let us know about the tech failures we missed in the comments.

Verizon eyeing a potential Netflix buyout

Verizon Wireless has emerged as a potential suitor to take over ailing video streaming service Netflix. Shares in Netflix surged roughly $6 as news of the possible buyout reached investors during trading on Monday.

Less than a week ago, word leaked that Verizon has been in talks with movie studios and television networks regarding licensing content for an online streaming service of their own. At the time, Verizon CEO Lowell McAdam noted that his company was interested in such a venture by admitting that Verizon considered putting in a bid for Hulu.com earlier this summer.

Verizon would stream video over Internet connections in markets where FIOS isn’t yet available. It is believed that if Verizon doesn’t buy Netflix, they could introduce their own video service with more than 3,000 titles at a price of $5 to $10 per month. In contrast, Netflix charges $8 monthly for access to over 30,000 programs.

Such a deal could be the saving grace for Netflix, a company that hasn’t had a favorable 2011. Trouble started in July when the online streaming site announced a restructuring of their DVD and streaming plans. At the time, it cost members $10 a month for unlimited streaming and unlimited DVD rentals by mail. The new plan split those services into two separate packages, resulting in a 60 percent increase if members chose to keep both services. Nearly amillion subscribers left the service over the incident.

Netflix later decided to split the business into two, renaming the DVD-by-mail department to Qwikster. CEO Reed Hastings called off the plans less than a month later.

Both Netflix and Verizon declined to comment on a possible buyout.

Nielsen survey reveals habits of Netflix and Hulu customers

Watching directly on a computer is the most popular method that customers use each service, with 42 percent of Netflix users and 89 percent of Hulu subscribers falling in this group. Game consoles are also very popular with video streamers. Half of all Netflix users in the study log in using a Wii, PS3 or Xbox. Only three percent of subscribers use a mobile phone or iPad to watch programming. Users were allowed to choose multiple viewing methods to best reflect their watching habits.

Even more interesting is the type of content that respondents are viewing from each site. According to the survey, over 50 percent of Netflix customers use the service strictly for watching movies, while only 11 percent of those questioned watch television shows exclusively. This is in stark contrast to Hulu users, where the majority polled, a staggering 73 percent, only use the service for television shows.

Do you subscribe to either of these online streaming services? If so, does this data accurately reflect your watching habits?