Tennessee’s Netflix Law And The Entertainment Industry’s Public Image Problem

The state’s governor has just signed a bill criminalizing “entertainment services theft.” I can understand services like Netflix and HBOGO having a legitimate interest in cracking down on folks who steal and resell large numbers of passwords, as Tim Lee at Ars Technica reports is what the bill’s sponsor really intended. But it’s not clear why either that problem or the prospect of multiple people using the same password are a problem that require legislation rather than vigorous internal enforcement of Netflix’s Terms of Use (it’s not at all clear to me that Netflix wanted or pushed for this legislation, though perhaps they did). In fact, those terms make it clear that having multiple people within a household using the same account is a design feature of the service rather than a bug that requires vigorous regulation:

-You are also responsible for maintaining the confidentiality of your account and password and for restricting access to your computer or Netflix ready device. If you disclose your password to anyone or share your account and/or devices with other people, you take full responsibility for their actions.

-You may instantly watch on up to six unique authorized Netflix ready devices. For certain membership plans, you will be allowed to instantly watch simultaneously on more than one Netflix ready device within your household, up to total of four devices at a given time.

-You also agree not to impersonate any other person while using the Netflix service, conduct yourself in a vulgar or offensive manner while using the Netflix service, or use the Netflix service for any unlawful purpose.

Presumably, when Netflix wrote that customer agreement, it assumed it would be able to enforce it by monitoring customer behavior and banning or referring for prosecution users who flagrantly violate the rules.

From a more strategic perspective, I question the wisdom of providers pushing for harsh legislation against content theft as a hedge against a shifting market. For the record, I am not comfortable with torrenting content, and made a resolution to stop doing it a while ago. And I don’t really object to prosecutions of services that systematically copy and distribute content illegally. But prosecuting individual users seems both unlikely to deter people from seeking content at lower prices or for free, and to do some harm when industries try to shift to new models in the future. The cost of investigating, indicting, and prosecuting individual users is high enough that it can’t and won’t happen to everyone—or more importantly, to a sufficiently large number of people such that everyone will have to think hard before they torrent.

And big public pushes for anti-piracy legislation tend to overshadow innovation, especially when the innovation we see the results of are things like the movie studios’ obsession with 3D as a way to get moviegoers to pay more for tickets. Fairly or unfairly, I think a lot of consumers look at the entertainment industry as the equivalent of the kid on the playground with a cool toy he’ll only let you play with under circumstances so restrictive you long to feed him a hearty meal of sand. Sure, companies like Apple and Amazon have beat content-creating industries to the punch technologically, but I also think they’re also perceived as companies that are in the business of getting consumers access to what they want, and so people don’t feel a deep and burning desire to stick it to them. Part of the reason Hulu is so brilliant is that it both meets a consumer demand and helps boost the perception that NBCUniversal, Fox, and Disney-ABC are as invested as users are in getting content out there.

I’m fond of hybrid solutions, and I think the one here might be for the industries to focus on narrower legislation while marketing their innovations more aggressively. Winning the war on illicit content use is going to be as much a matter of customer service as it is of publicly decrying violations of intellectual property law.