Quickflix Australia complains to Netflix

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#1130476 17-Sep-2014 10:11

NonprayingMantis:
see my post, as well as the original open letter.

Netflix does not pay for the content it sells to NZers (and Ozzie). It pays for content it sells to Americans.

A more analagous situation regarding Amazon, would be if this happened:

1) NZer orders DVD from Amazon
2) Amazon grabs a DVD they purchased from, say, Sony Pictures that they might otherwise sell to an American.
3) Instead of sending out the DVD to the NZer, they just make a copy of it and send the copy without telling Sony Pictures or paying them any royalties
4) Next time a NZer orders a DVD, amazon make another copy, incur basically no cost, and ship that copy again.
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they aren't incurring the major costs of actually providing the DVD (i.e. buying them in the first place)

If that sort of thing was happening, then rightly mightyape.co.nz would get pretty peeved that they incur the costs to the suppliers by providing 'genuine DVDs', where Amazon is getting away with incurring no costs by providing copies they have no right to sell.

Not quite, it is more like
0) Amazon buys the rights from Sony Pictures to duplicate DVDs to sell to Americans. They pay a fee acceptable to Sony based on who knows what, presumably projected volume of sales.
1) NZer orders DVD from Amazon using an American delivery address.
2) Amazon makes a copy according to their agreement with Sony.
3) Amazon send the copy to the US address and pay Sony according to their agreement
4) Next time a NZer orders a DVD, amazon makes another copy, and incurs the same cost as in #3
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they have a better purchase price with Sony than their NZ based competitors are able to obtain

Killerkiwi2005

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#1130493 17-Sep-2014 10:30

A more analagous situation regarding Amazon, would be if this happened:

1) NZer orders DVD from Amazon
2) Amazon grabs a DVD they purchased from, say, Sony Pictures that they might otherwise sell to an American.
3) Instead of sending out the DVD to the NZer, they just make a copy of it and send the copy without telling Sony Pictures or paying them any royalties
4) Next time a NZer orders a DVD, amazon make another copy, incur basically no cost, and ship that copy again.
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they aren't incurring the major costs of actually providing the DVD (i.e. buying them in the first place)

If that sort of thing was happening, then rightly mightyape.co.nz would get pretty peeved that they incur the costs to the suppliers by providing 'genuine DVDs', where Amazon is getting away with incurring no costs by providing copies they have no right to sell.

Your example is a bit wrong netflix still gets there monthly fee which Sony gets a cut of so sony still gets paid, the creator gets paid, yes they can make more by forcing region sales but thats an artifact of when you had to ship physical goods anyway and I'm not sure why free trade agreements even allow it (not government enforced I guess, although the copyright is so it kind of is govt enforced)

And this model is exactly what amazon are attempting to move to with print on demand :)

I think the netflix long term game is to convince the suppliers to do away with the regional rights distribution anyway.

grant_k

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#1130495 17-Sep-2014 10:31

graemeh: Not quite, it is more like
0) Amazon buys the rights from Sony Pictures to duplicate DVDs to sell to Americans. They pay a fee acceptable to Sony based on who knows what, presumably projected volume of sales.
1) NZer orders DVD from Amazon using an American delivery address.
2) Amazon makes a copy according to their agreement with Sony.
3) Amazon send the copy to the US address and pay Sony according to their agreement
4) Next time a NZer orders a DVD, amazon makes another copy, and incurs the same cost as in #3
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they have a better purchase price with Sony than their NZ based competitors are able to obtain

Thank you Graeme, that makes a lot more sense than what NPM was saying above.

And here is the thing:

Why should a Netflix US customer in NZ pay more for the same product than a US customer does, when no shipping of physical goods is taking place?

We are in a Global Marketplace, so this kind of differential pricing model is obsolete.

graemeh

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#1130506 17-Sep-2014 10:55

grant_k: And here is the thing:

Why should a Netflix US customer in NZ pay more for the same product than a US customer does, when no shipping of physical goods is taking place?

We are in a Global Marketplace, so this kind of differential pricing model is obsolete.

The answer is because the customers in the NZ market are willing to pay the higher price. As you have said, this model breaks once the customers are able to buy from other markets.

NonprayingMantis

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#1130541 17-Sep-2014 11:39

Killerkiwi2005:

A more analagous situation regarding Amazon, would be if this happened:

1) NZer orders DVD from Amazon
2) Amazon grabs a DVD they purchased from, say, Sony Pictures that they might otherwise sell to an American.
3) Instead of sending out the DVD to the NZer, they just make a copy of it and send the copy without telling Sony Pictures or paying them any royalties
4) Next time a NZer orders a DVD, amazon make another copy, incur basically no cost, and ship that copy again.
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they aren't incurring the major costs of actually providing the DVD (i.e. buying them in the first place)

If that sort of thing was happening, then rightly mightyape.co.nz would get pretty peeved that they incur the costs to the suppliers by providing 'genuine DVDs', where Amazon is getting away with incurring no costs by providing copies they have no right to sell.

Your example is a bit wrong netflix still gets there monthly fee which Sony gets a cut of so sony still gets paid, the creator gets paid, yes they can make more by forcing region sales but thats an artifact of when you had to ship physical goods anyway and I'm not sure why free trade agreements even allow it (not government enforced I guess, although the copyright is so it kind of is govt enforced)

And this model is exactly what amazon are attempting to move to with print on demand :)

I think the netflix long term game is to convince the suppliers to do away with the regional rights distribution anyway.

your assumption here is that Netflix pays a proportion of each subscribers revenue to the content provider.

That is not the case. This is Quickflix's main point. Did you even read the letter?

Almost all of Netflix's content deals are on a flat fee regional basis (i.e. pay $xm for the rights to stream in the USA, pay $xm for the rights to stream in Canada etc etc), and do not fluctuate based on how many subscribers they get.

This means that every incremental subscriber they get for regions where they have not paid the rights, is pure profit for them. They don't pay any extra to the studios.

NonprayingMantis

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#1130551 17-Sep-2014 11:46

graemeh:
NonprayingMantis:
see my post, as well as the original open letter.

Netflix does not pay for the content it sells to NZers (and Ozzie). It pays for content it sells to Americans.

A more analagous situation regarding Amazon, would be if this happened:

1) NZer orders DVD from Amazon
2) Amazon grabs a DVD they purchased from, say, Sony Pictures that they might otherwise sell to an American.
3) Instead of sending out the DVD to the NZer, they just make a copy of it and send the copy without telling Sony Pictures or paying them any royalties
4) Next time a NZer orders a DVD, amazon make another copy, incur basically no cost, and ship that copy again.
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they aren't incurring the major costs of actually providing the DVD (i.e. buying them in the first place)

If that sort of thing was happening, then rightly mightyape.co.nz would get pretty peeved that they incur the costs to the suppliers by providing 'genuine DVDs', where Amazon is getting away with incurring no costs by providing copies they have no right to sell.

Not quite, it is more like
0) Amazon buys the rights from Sony Pictures to duplicate DVDs to sell to Americans. They pay a fee acceptable to Sony based on who knows what, presumably projected volume of sales.
1) NZer orders DVD from Amazon using an American delivery address.
2) Amazon makes a copy according to their agreement with Sony.
3) Amazon send the copy to the US address and pay Sony according to their agreement
4) Next time a NZer orders a DVD, amazon makes another copy, and incurs the same cost as in #3
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they have a better purchase price with Sony than their NZ based competitors are able to obtain

yep, apart from the extra money paid to sony. They won't be paying anything extra to sony per sale, because they pay a flat fee purely for the US market. Their better purchase price to Sony of $0 exists because they are breaking their contract with Sony by making unauthorised copies.

Bear in mind their agreement with Sony was to only sell to people in America. If a few NZers slip through without them knowing, then its arguable whether it is a big deal. However, if they are knowingly selling to NZers (which Netflix surely are) then they are clearly breaching their agreements with Sony.

They have the right to copy for American sales, but not the right to copy for NZ sales. Knowingly selling to Nzers means they are copying works for which they do not have the rights.

In other words, they are breaching copyright.

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#1130562 17-Sep-2014 11:54

NonprayingMantis:
graemeh:
NonprayingMantis:
see my post, as well as the original open letter.

Netflix does not pay for the content it sells to NZers (and Ozzie). It pays for content it sells to Americans.

A more analagous situation regarding Amazon, would be if this happened:

1) NZer orders DVD from Amazon
2) Amazon grabs a DVD they purchased from, say, Sony Pictures that they might otherwise sell to an American.
3) Instead of sending out the DVD to the NZer, they just make a copy of it and send the copy without telling Sony Pictures or paying them any royalties
4) Next time a NZer orders a DVD, amazon make another copy, incur basically no cost, and ship that copy again.
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they aren't incurring the major costs of actually providing the DVD (i.e. buying them in the first place)

If that sort of thing was happening, then rightly mightyape.co.nz would get pretty peeved that they incur the costs to the suppliers by providing 'genuine DVDs', where Amazon is getting away with incurring no costs by providing copies they have no right to sell.

Not quite, it is more like
0) Amazon buys the rights from Sony Pictures to duplicate DVDs to sell to Americans. They pay a fee acceptable to Sony based on who knows what, presumably projected volume of sales.
1) NZer orders DVD from Amazon using an American delivery address.
2) Amazon makes a copy according to their agreement with Sony.
3) Amazon send the copy to the US address and pay Sony according to their agreement
4) Next time a NZer orders a DVD, amazon makes another copy, and incurs the same cost as in #3
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they have a better purchase price with Sony than their NZ based competitors are able to obtain

yep, apart from the extra money paid to sony. They won't be paying anything extra to sony per sale, because they pay a flat fee purely for the US market. Their better purchase price to Sony of $0 exists because they are breaking their contract with Sony by making unauthorised copies.

Bear in mind their agreement with Sony was to only sell to people in America. If a few NZers slip through without them knowing, then its arguable whether it is a big deal. However, if they are knowingly selling to NZers (which Netflix surely are) then they are clearly breaching their agreements with Sony.

They have the right to copy for American sales, but not the right to copy for NZ sales. Knowingly selling to Nzers means they are copying works for which they do not have the rights.

In other words, they are breaching copyright.

I've had another read of the letter that started this discussion. I can't see anywhere in the letter that it states that Netflix pay a flat fee for their content.

Assuming that the flat fee is true, this just means that there is no per unit licensing cost for Netflix, they still face substantial infrastructure costs and what I am sure is a large payment to the rights holder for the privilege of reselling.

I don't know US law so I can't say they are breaching copyright, they are at risk of breaching their license agreement but if they genuinely believe that the person buying from them is a US buyer then it is hard to see how they are even guilty of that.

The whole geographic pricing model is fundamentally broken for electronically delivered material, there is absolutely no way the seller can determine which region the buyer is located in, it is just not possible.

The business model needs to be replaced with one that works in today's technical environment.

old3eyes

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#1130601 17-Sep-2014 12:30

graemeh:
grant_k: And here is the thing:

Why should a Netflix US customer in NZ pay more for the same product than a US customer does, when no shipping of physical goods is taking place?

We are in a Global Marketplace, so this kind of differential pricing model is obsolete.

The answer is because the customers in the NZ market are willing to pay the higher price. As you have said, this model breaks once the customers are able to buy from other markets.

Customers in NZ aren't willing to pay a higher price , they are forced to pay a higher price..

Regards,

Old3eyes

graemeh

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#1130612 17-Sep-2014 12:45

old3eyes:
graemeh: The answer is because the customers in the NZ market are willing to pay the higher price. As you have said, this model breaks once the customers are able to buy from other markets.

Customers in NZ aren't willing to pay a higher price , they are forced to pay a higher price..

Nobody is forcing the customer to pay the price.

They have at least three options if they don't like the price they are offered:
1) Don't buy
2) Buy from someone else
3) Buy a counterfeit or pirated copy

In the past don't buy was pretty much the only option now options 2 and 3 are also easily available.

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#1130619 17-Sep-2014 12:55

graemeh:
old3eyes:
graemeh: The answer is because the customers in the NZ market are willing to pay the higher price. As you have said, this model breaks once the customers are able to buy from other markets.

Customers in NZ aren't willing to pay a higher price , they are forced to pay a higher price..

Nobody is forcing the customer to pay the price.

They have at least three options if they don't like the price they are offered:
1) Don't buy
2) Buy from someone else
3) Buy a counterfeit or pirated copy

In the past don't buy was pretty much the only option now options 2 and 3 are also easily available.

Option 3 is not something that should be encouraged.

Here is a crazy notion, lets give peace a chance.

MikeB4

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#1130621 17-Sep-2014 12:56

I still believe Quickflix should test their position in Court, if they lose, shut up and review their business. If they win they win.

Here is a crazy notion, lets give peace a chance.

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#1130629 17-Sep-2014 12:59

graemeh:
NonprayingMantis:
graemeh:
NonprayingMantis:
see my post, as well as the original open letter.

Netflix does not pay for the content it sells to NZers (and Ozzie). It pays for content it sells to Americans.

A more analagous situation regarding Amazon, would be if this happened:

1) NZer orders DVD from Amazon
2) Amazon grabs a DVD they purchased from, say, Sony Pictures that they might otherwise sell to an American.
3) Instead of sending out the DVD to the NZer, they just make a copy of it and send the copy without telling Sony Pictures or paying them any royalties
4) Next time a NZer orders a DVD, amazon make another copy, incur basically no cost, and ship that copy again.
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they aren't incurring the major costs of actually providing the DVD (i.e. buying them in the first place)

If that sort of thing was happening, then rightly mightyape.co.nz would get pretty peeved that they incur the costs to the suppliers by providing 'genuine DVDs', where Amazon is getting away with incurring no costs by providing copies they have no right to sell.

Not quite, it is more like
0) Amazon buys the rights from Sony Pictures to duplicate DVDs to sell to Americans. They pay a fee acceptable to Sony based on who knows what, presumably projected volume of sales.
1) NZer orders DVD from Amazon using an American delivery address.
2) Amazon makes a copy according to their agreement with Sony.
3) Amazon send the copy to the US address and pay Sony according to their agreement
4) Next time a NZer orders a DVD, amazon makes another copy, and incurs the same cost as in #3
5) They continue to do this, selling copies of DVDs to NZers at reduced prices, because they have a better purchase price with Sony than their NZ based competitors are able to obtain

yep, apart from the extra money paid to sony. They won't be paying anything extra to sony per sale, because they pay a flat fee purely for the US market. Their better purchase price to Sony of $0 exists because they are breaking their contract with Sony by making unauthorised copies.

Bear in mind their agreement with Sony was to only sell to people in America. If a few NZers slip through without them knowing, then its arguable whether it is a big deal. However, if they are knowingly selling to NZers (which Netflix surely are) then they are clearly breaching their agreements with Sony.

They have the right to copy for American sales, but not the right to copy for NZ sales. Knowingly selling to Nzers means they are copying works for which they do not have the rights.

In other words, they are breaching copyright.

I've had another read of the letter that started this discussion. I can't see anywhere in the letter that it states that Netflix pay a flat fee for their content.

Assuming that the flat fee is true, this just means that there is no per unit licensing cost for Netflix, they still face substantial infrastructure costs and what I am sure is a large payment to the rights holder for the privilege of reselling.

I don't know US law so I can't say they are breaching copyright, they are at risk of breaching their license agreement but if they genuinely believe that the person buying from them is a US buyer then it is hard to see how they are even guilty of that.

The whole geographic pricing model is fundamentally broken for electronically delivered material, there is absolutely no way the seller can determine which region the buyer is located in, it is just not possible.

The business model needs to be replaced with one that works in today's technical environment.

the letter talks about how Netflix are not paying the costs of business and getting a free ride.

as for flat/fixed fee, have a look here:

http://ir.netflix.com/faq.cfm#Question31141

"How do you account for streaming content?

We generally license content for a fixed fee and a defined time period with payment terms varying by agreement."

StarBlazer

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#1130638 17-Sep-2014 13:08

At the end of the day it's up to the original content producers and distributors to make it easy for non USA markets to get content for a suitable price and in a timely fashion. The Quickflix argument could either increase or decrease both copyright infringement and parallel consumption.

If the NZ/AU price is too high for content, domestic distributors charge more or obtain fewer or older content - this will mean that the domestic market will look elsewhere; legally or otherwise.

If the studios et al bring the price down then domestic distributors can either charge as before but have first class content or charge less and have a high market penetration.

This conversation is pointless however if they continue to charge like wounded bulls or provide poor, delayed content.

Personally I will not be signing up for any of the online services until I can download while at home and consume on the go - just like you can with Spotify premium for music.

Procrastination eventually pays off.

graemeh

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#1130704 17-Sep-2014 14:17

NonprayingMantis:
graemeh:
I've had another read of the letter that started this discussion. I can't see anywhere in the letter that it states that Netflix pay a flat fee for their content.

Assuming that the flat fee is true, this just means that there is no per unit licensing cost for Netflix, they still face substantial infrastructure costs and what I am sure is a large payment to the rights holder for the privilege of reselling.

I don't know US law so I can't say they are breaching copyright, they are at risk of breaching their license agreement but if they genuinely believe that the person buying from them is a US buyer then it is hard to see how they are even guilty of that.

The whole geographic pricing model is fundamentally broken for electronically delivered material, there is absolutely no way the seller can determine which region the buyer is located in, it is just not possible.

The business model needs to be replaced with one that works in today's technical environment.

the letter talks about how Netflix are not paying the costs of business and getting a free ride.

as for flat/fixed fee, have a look here:

http://ir.netflix.com/faq.cfm#Question31141

"How do you account for streaming content?

We generally license content for a fixed fee and a defined time period with payment terms varying by agreement."

Thanks.

So the fee is fixed based on an agreed price between Netflix and the content provider.

This gives Netflix an incentive to have as many customers as they can get. Once the overhead costs are covered then each extra customer is much more profitable than the first few customers.

Killerkiwi2005

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#1130844 17-Sep-2014 17:23

your assumption here is that Netflix pays a proportion of each subscribers revenue to the content provider.

That is not the case. This is Quickflix's main point. Did you even read the letter?

Almost all of Netflix's content deals are on a flat fee regional basis (i.e. pay $xm for the rights to stream in the USA, pay $xm for the rights to stream in Canada etc etc), and do not fluctuate based on how many subscribers they get.

This means that every incremental subscriber they get for regions where they have not paid the rights, is pure profit for them. They don't pay any extra to the studios.

So what? thats the studios call to have agreed to a fix fee, if the are that worried they would go for a few cents per play fee like spotify

I choose to stop here, you seem to believe the current mainstream distribution model is fine, so I agree to disagree and its sunny outside

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