netflix-logoRemember the “good old days” when anyone could buy an e-book from anywhere? That was the state of things in the early days of the e-book, before the publishers were paying enough attention to the e-book market to notice that e-book stores like eReader and Fictionwise weren’t honoring territorial rights restrictions on the e-books they sold. Then in early 2009, not too long after the introduction of the Kindle, eReader abruptly stopped selling e-books to people outside those specific territories, and even stopped letting them download e-books they’d already purchased. Other bookstores quickly followed suit. The restrictions may have been easily bypassed at first, but they soon tightened up.

Those incidents from the dawn of the Kindle era came to mind as I reviewed the news from the last few days that Netflix announced it was taking a harder stance against the practice of bypassing its own territorial restrictions as it expands into making content available in more countries.

Netflix isn’t able to license every show for every country, so it limits which shows can be streamed depending on where the viewer is located, and it uses the viewer’s IP address—the numeric code that (theoretically) uniquely identifies a specific computer or router on the Internet—to determine their location. Until now, viewers had been able to bypass those restrictions by using virtual private networks and proxy servers to make it look like they were using an IP address from another country.

It’s unclear exactly how successful Netflix can be at stopping this. Netflix’s own execs had recently admitted that it was “not obvious” how to limit use of VPNs, given that it’s trivial for VPN providers to switch out their IP addresses once they get noticed and blocked. But it has announced it intends to try—probably, Techdirt’s Karl Bode posits, because of pushback it got from content providers after making that admission.

On Popehat, acclaimed copyright litigator Marc Randazza wishes that Netflix wouldn’t bother. He explains:

I frequently log in to my Netflix account from an Italian VPN. I like to watch movies in Italian. I am teaching my kids Italian, and I like them to watch their cartoons in Italian. The same cartoons that are on my Netflix USA account are also available on Netflix Italy. But, for some reason, Netflix does not give me the option to change the language to Italian, as it does if I log in through an IP address in Europe. Netflix could easily offer the same shows with the Italian language option in the USA, but for some reason, they would rather not.

Ironically, this is the inverse of the hypothetical situation I brought up about e-book licensing. What if an American expatriate living in Italy wanted to read e-books in English? The market for English-language material in Italy wouldn’t be as great as in a country where it was spoken as the lingua franca, so it might not be licensed to any Italian e-book publisher—leaving the customer without a way to buy the e-book. But he could legally import the print edition easily enough, because print book licensing would “count” it as having been sold in the country that exported it—whereas e-books “count” for the country where they’re purchased.

That same conundrum of the legality of importing physical goods is what drove Hollywood studios to insist on region-encoding when their movies were released on DVD and Blu-ray—so that people in America couldn’t import the much-cheaper Asian editions of their movies (released at a lower cost because people in most parts of Asia don’t make as much as Americans and can’t spend as much on movies) instead of the more expensive US editions. (Not that region-encoding really helped them much in the end, given how trivial it is to bypass.) And it’s also what underlay the Wiley vs. Kirtsaeng Supreme Court decision, in which a textbook publisher tried but failed to block an exchange student from importing and selling cheaper editions of its textbooks sold abroad.

The funny thing is that the reason we have territorial restrictions on both e-books and movies is effectively the same, and can be summed up in one word: money. Even leaving the different incomes of different parts of the world aside, the economics of licensing content is such that content-owners can make much more money by doling out licenses piecemeal than they can by licensing to the entire world. A single company can only pay so much money for worldwide rights—and the smaller amounts individual companies pay for rights in just their own territory quickly adds up to more than that. That’s true for books, and it’s true for TV and movies. And that hasn’t been changed by the Internet, nor is it likely to change.

The problem is, the Internet was made to be by and large geographically agnostic. The computer scientists who dreamed it up back in the ‘70s and ‘80s had no idea that it would become a global center of commerce in just a couple of decades, so they didn’t build any sort of geographic restrictions in. The idea of geographic restrictions would have been anathema to them, because the whole point was to make it easier for researchers and scientists in any part of the world to talk to each other. As far as the Internet was concerned, it shouldn’t matter whether you’re in the US or China, or even at the South Pole. All data should be just as accessible anywhere. And those computer scientists succeeded admirably at this goal.

But the global nature of the Internet didn’t change the territorial nature of real-world economics, and the way that people’s and companies’ livelihoods depended on being able to deny data access to people in other parts of the world. As a result, people have been retrofitting clumsy geographic kludges onto the net ever since—with Netflix’s vow to fight VPNs being only the most recent example.

On Popehat, Marc Randazza expresses the “completely untested legal theory […] that ‘region shifting’ should be considered to be ‘fair use.’” Expatriates of other countries who live in the USA, he says, ought to be able to watch movies and TV in their native language—which Netflix doesn’t provide in the USA, but does in their native countries. (See? It’s my “American expatriate abroad” argument inverted again.) And he suggests that using VPNs to deny legitimate access to such things “[creates] a hell of a legitimate argument that torrenting, to watch in your preferred language, is a legitimate activity.” And he adds that he might be willing to defend someone sued for that pro bono.

The argument actually makes me chuckle a little, because of my background as a fan of both Japanese animation and Hong Kong cinema. Some anime companies, such as Streamline, only released anime in dubbed form, and Miramax has a bad habit of releasing Jackie Chan movies with bad dubs and terrible new soundtracks, with no original language option available. Should fans who don’t speak Japanese or Chinese but would nonetheless rather see these movies in those languages rather than suffer a cheesy English dub also have the right to torrent them if they’re not legally available?

Anyway, I rather doubt Randazza would get very far making that argument, acclaimed copyright litigator or no. I didn’t have much luck with my argument that space-shifting e-books ought to be fair use, and there actually is some jurisprudence to support that idea.

It really is a pity that real-world economics is so at odds with the global nature of the Internet. There are people all over the world who would love to get their hands on books or movies made for some other territory. People crack DRM on their DVD players so they can buy and play foreign DVDs or Blu-rays, or order foreign-language books from Amazon affiliates in other countries, or use VPNs to access foreign editions of streaming video services. And of course there are torrents and other pirate sources.

But the easiest paths of getting these goods—just connecting up to the Internet and placing an order without having to jump through hoops—are blocked to them because publishers or studios can make more money by doling out the rights piecemeal, and simply didn’t happen to include their particular piece. Customers get turned away because nobody has the rights where they live, and they can’t buy those goods from somewhere else.

Maybe someday someone will figure out a way to make worldwide licensing economical. But I’m not holding my breath.


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