It is not a matter of can you trust Netflix. As far as we
know, the short answer is yes. Netflix does not track us online, package us to
marketers or cross-reference our private messages or social media posts (even
though Netflix has access via a Facebook login). I doubt Netflix will violate
its core brand by incorporating ads into its interface.
The issue about Can you trust Netflix is more that Netflix could one day turn into the ‘Creepy Uncle’ when it realises the intrinsic value of your personally identifiable information (data). Today that uncle is benign but as he grows older, bolder, uglier and competes for more for your attention – who knows.
Our US correspondent Sam Bocetta investigates the question –
Can you trust Netflix? While Sam’s view is from a US perspective, so too all the
FAANG companies have their roots there.
Can you trust Netflix?
I’m going to tie Netflix to the whipping post for the way it
uses customer data, although the same argument applies to any other
streaming service that we put under the microscope.
To be clear, we are talking about Amazon Prime, Disney+,
Roku, Apple TV, YouTube, Foxtel, Stan, and any streaming service.
Netflix is reasonably transparent about its present use of
customer data – to keep customers and to serve them what they want. Its
business model, unlike many others, does not revolve around serving ads,
driving you to its retail or service offerings, or selling your data.
What is a video streaming service?
It is like Spotify or iTunes only it streams video content
via the internet. From a user’s perspective, it is a portal to an ‘all you can
eat’ movies, TV shows, documentaries and more in a relatively simple interface
that works on TVs, tablets, phones, games consoles, set-top boxes, and PCs.
Netflix has a country-specific ‘catalogue’ based on the content distribution rights licences it can get. For example, it cannot get content from Disney+ or Amazon in Australia but can show it elsewhere. Catalogues vary enormously in size and scope from country to country.
It also makes recommendations based on what you watch and if you give it the thumbs up or down. That recommendation means it knows to serve shows you may like. It is important to like or dislike a show – it gets the hint quickly.
Netflix services start at A$9.99 for a basic plan (one
device at a time in SD), Standard Plan $13.99 (two devices at a time in HD) and
Premium Plan $19.99 (four devices at a time
in HD/UHD if available). As it is a paid-for service and makes money, there is
no imperative to sell your data. But any service that is free or lower cost has
to supplement its income – data is the new gold.
It has local partners as well. In Australia, it is Aussie Broadband,
Fetch, Foxtel, Optus, Telstra, and Vodafone – that can bill you as part of the internet
services. To an extent, these partners are privy to your Netflix activities.
Netflix is the 1000lb gorilla
It has about 167 million subscribers in 190+ countries and more than 140 million hours of content viewed daily. You can read more in its Form-K 2019 annual report. It is the king of the streaming world, and it aims to be far more all-encompassing.
Amazon Prime is playing catch up claiming 150 million global
members – but that is a general A$6.99 a month Amazon Prime membership, not a stand-alone
streaming membership. It is also a lot more limited in its catalogue and device
But we all know what that means – Amazon knows our viewing habits as well and we cannot recommend that. If you enter its rabbit-hole the next thing, you know you are buying its toothpaste!
Apple TV+ is a new entrant appealing to Apple users. But content
is extremely thin, and it is yet to make any dent. We suspect Apple TV+ will
simply become a way for it to make the Apple walled-garden stickier making money
repackaging other streaming content – not the production house Tim Cook hopes for.
Now with the onslaught of new entrants, you may start to see
that the only way for Netflix to stay on top is to use data that no other service
has. By sheer weight of numbers, it can use its commercial might with content
and other distributors.
Huston, do we have a problem?
Why is Netflix included in FAANG? What do our legislators know
that we don’t?
Netflix, as the biggest kid on the block by far, has exponentially
greater power. And that is why US Legislators lump it together with the nasty
FAANG – they need to ensure that it never bites the hand that feeds it.
There has been a growing rumbling amongst that Netflix is getting a ‘free ride’ while fellow FANG members like Facebook have taken a well-deserved beating for years over their data treatment. Then came the tone-deaf post through the corporate Twitter account that mocked 53 individuals (not by name, thank goodness) who watched A Christmas Prince 18 days in a row.
Setting aside the obvious psychological issues involved with
those viewers’ choice, it caused a large swath of the subscriber base to rouse
themselves slightly from the couch and say, “Wait. You mean it knows what
I’m watching?” Oh, yes, it knows that and so much more.
Netflix collects masses of PII – part I
In brief, it uses PII primarily to develop a profile of
What you watch
When you watch it
What device and where you watch it
Your likes and dislikes (genres)
It does not collect is who is watching and their age/gender,
although it could well extrapolate that. Motley Fool (stock market advice) has
an excellent short article here
that satisfies us.
But that data is also gold. For example, if it sees an
emerging content pattern it springs into action to satisfy that – be it
movies/series it makes, commissions, or buys that from other content producers.
Netflix even knows if something will be a hit before it airs.
Armed with this it can beat content providers into submission, exert pressure
on scripts/cast/formats and have inside knowledge of what it pays for content.
Seriously, do not read it. Life is too short. Here is the
Netflix collects your data by any legal means. That includes
from its partners.
Guess what? Amazon Alexa and Google Assistant are partners,
so if you say anything that those little trolls hears and records, expect it to
go into the Netflix database. Facebook is a partner – hmmm.
Suffice it to say the company collects and analyses way more
data than you think it does.
Analysts say that
Netflix logs everything you have ever watched and how you watch – every time you pause, what programs you consider watching but choose not to and when you’re most likely to binge.
If it ever used website trackers, Netflix could cross-reference that viewing data with your social media accounts, your purchasing habits, your search history and even your emails.
In the age of surveillance capitalism, this data could be worth a fortune to marketers, political campaigns and advertisers.
Will Netflix ever monetise your PII?
Well, believe it or not, that 167 million subscribers are a
drop in the bucket of 7.8 billion people. Take out China (1.4+ billion), Crimea,
North Korea, or Syria that cannot access Netflix and you can see that it has a long
way to go before it has any real global market dominance.
No, we would be more worried about credit card companies and
even Apple or Microsoft before we start on Netflix.
Sixty-one million of Netflix’s users are in the USA.
According to Investopedia, 46% of its revenue and 65% of its profit comes from there.
Although it says, Netflix’s international streaming memberships were the
company’s fastest-growing category in 2019.
Netflix has the potential to be the leading global streaming
company, and it will address this one country and language at a time.
For now, Netflix is focusing on building its subscriber base.
That is via massive marketing budgets, but it may come to offering free ad-driven
services in specific markets to ultra-premium and private services in others.
There is no sign that it will sell its data, other than for targeting
advertising should that freemium model eventuate.
Its Form 10-K filing states (as a business risk)
Privacy concerns could limit our ability to collect, and
leverage member personal information and other data and disclosure of member
personal information and other data could adversely impact our business and
In the ordinary course of business and in particular, in
connection with content acquisition and merchandising our service to our
members, we collect and utilise information supplied by our members, which may
include personal information and other data. We currently face certain legal
obligations regarding how we treat such information, including but not limited
to Regulation (EU) 2016/679 (also known as the General Data Protection
Regulation or “GDPR”) and the California Consumer Privacy Act
(“CCPA”). Any actual or perceived failure to comply with the GDPR,
the CCPA, other data privacy laws or regulations, or related contractual or
other obligations, or any perceived privacy rights violation, could lead to
investigations, claims, and proceedings by governmental entities and private parties,
damages for contract breach, and other significant costs, penalties, and other
liabilities, as well as harm to our reputation and market position.
We are satisfied for now that Netflix simply wants to
dominate the global streaming market and part of that strategy is to supply
what viewers want – win-win.
While Netflix is open about the PII, it collects you can’t do
anything with it. You can download your viewing activity but not edit or delete
This data lockdown sets Netflix up in the front seat when it
comes to negotiations with studios, distributors, employees, and contractors
because the other side simply has to take Netflix’s word as to how many people
watch a show.
Sounds a bit monopolistic, no? Right now, the company does
not even pretend to be concerned about the idea that data belongs to its users and
not vice versa.
GadgetGuy’s take: Can you trust Netflix? Is its data collection benign or nefarious?
Netflix is no better or worse than the average big tech company that, somewhere along the way, began to look at data as a business model and asset.
The human race, initially so enamoured with the things that
these companies enabled us to do, invited them into our lives and joyfully
allowed them to Hoover up any stray bit of data not tied down.
So, in a way, we are to blame for the FAANG monster that
arose. Since no tech company ever has shown a willingness to part with control
over a critical asset, just because some peasant asked them to, we have the
situation we are currently in.
Probably the only way out is more government intrusion and
regulation. That is bad enough but likely the only way to keep the tech giants
from becoming governments to themselves.
Adding to the problem is how quickly humanity has developed
an insatiable lust for tech products, even to the extent of letting
mega-corporations share the most intimate details of our lives. It is the
ultimate deal with the devil, signed and delivered.
Is there a FAANG cure coming any time soon?
I am waiting for the exciting development when blockchain technology develops to the extent that users (we) will be able to monetise our data rather than a company like Netflix. Imagine an arrangement where any FANG members or major telco ISPs are obliged to pay a customer for the privilege of using their data to market to them.
What delicious irony that would be. A step to that evolution
would be a system where paid and free services have different levels of
privacy. If you paid more, your service would not display ads, and the company
would refrain from collecting or storing your data.
The bottom line is that Netflix is gently pushing the boundary on what society considers as acceptable behaviour when it comes to handling customer data. Can you trust Netflix? Well today, yes.
Expect something to change. Maybe it will be a little. Perhaps
it will be a lot. But change it will. Unless, of course, it doesn’t.