First read: Noodling Netflix; striking out in France

Top of the Morning Netflix’s sudden and dramatic price hike last week continues to fuel outrage among some users and speculation as to Netflix’s motives among pundits. Adam Knight at I Eat Ewoks has the best take I’ve seen so far (h/t Felix Salmon of Reuters):

The Internet’s memory is short so let’s go back a week ago to when Netflix lost the Sony movies and almost lost Starz. Why did that happen? Netflix WI subscribers passed a certain number specified in the contract with Starz and Sony and so they lost the right to stream that content. After some talks they came back online and now, one week later, Netflix is breaking apart their WI subscribers from their DVD subscribers. I find it hard to consider this a coincidence.

Having a ton of DVD viewers that are not using WI artificially inflated their WI subscriber numbers and almost invalidated a content contract. The only way to lower that number is to remove their access and only let people that want WI subscribe to it and pay into the service. So now WI isn’t a bundled service but one you ask for and pay for. This way, Netflix lowers their perceived WI subscriber count, keeps their content deals without renegotiations, and generally carries on.

It could also benefit Netflix when it comes to negotiating new streaming deals. Having gaudy-looking total subscriber numbers out there only encourages content owners to up their demands for licensing fees. Walling off DVD-only subs from streaming negotiations might help Netflix keep a lid on those fees.

If Knight’s analysis is correct, though, and the abrupt price hike was spurred by the Sony/Starz kerfuffle, it’s hard to escape the impression of panic ($$) in Los Gatos. Was no one reading the contracts?

HADOPI: France’s copyright cops are being swamped by the volume of complaints being filed by content owners against alleged illegal file sharers. According to Ars Technica, HADOPI, the agency created by France’s vaunted “three-strikes” law to administer the graduated-response system, has received 18 million notices concerning purported incidents of file-sharing so far. Those have resulted in 470,000 initial notices being sent to ISPs for forwarding to their subscribers. Of those, about 20,000 have received second notices due to continued infringement.

In an interview with Ars, an agency official said the relatively small number of notices going out, relative to the volume of complaints, was a result of growing pains:

“The system we’re using is a prototype,” he said, with limited capacity. Work has begun on a more robust system, and “we think it’ll be ready at the end of the year.”

The agency has also referred the first 10 third-strike cases to the courts for possible disconnection from the Internet. One of those, a 54 year-old school teacher, claims he was a victim of Wi-Fi hacking and plans to challenge any penalty imposed in the Court of European Justice.