Why are Sky, Spark, TVNZ & MediaWorks going after CallPlus' global mode now? A theory

Sky TV, Spark (owner of Lightbox), TVNZ and MediaWorks have presumably never liked CallPlus' global mode feature, which makes it easy to access content on off-shore services like Netflix US.

But CallPlus first introduced global mode back in June 2013.*

Why are they only turning up the heat now?

Because Netflix NZ launched last month, and that development suddenly opened an easier pathway to the US version of the service. You can sign up with an NZ credit card before you country hop.

In fact, there are other pathways, including the fact Netflix has a more liberal credit card policy in Europe — and once you've signed up for Netflix in any country, you can change your Netflix country setting to the US, if you have a global mode service. But Mauricio's overall point stands. It's now a lot easier and obvious for Kiwis.

Shortly before Netflix NZ launched, CallPlus (which owns Slingshot and Orcon) introduced a global mode switcher. That made it easy to sign up for Netflix NZ, then once signed into the service turn global mode back on and hop across to Netflix US (which has around eight times the content; some shows aren't available on Netflix NZ because Sky holds local rights).

An email sent to Orcon customers on Thursday, just a couple of hours after legal action was taken, said its switcher had been defaulted to NZ — which was billed as a move to make Netflix NZ easier to use. It also included instructions on how to turn global mode back on:

Click to zoom.

A second major theme of comments on NBR and elsewhere — and indeed from CallPlus Group CEO Mark Callander —  is that if Spark is so anti global mode, then it should also crack down on its own customers who use software like Unblock-us to mask their country of origin and access offshore content.**

In a comment after NBR's Thursday story, Spark corporate comms head Richard Llewellyn implies the point of difference is that CallPlus is profiting from global mode: "We don’t think it’s on for New Zealand companies to reap profits from promotion of TV programmes that other New Zealand companies have paid hard-earned money for – it would be like paying to put on a concert and then someone else making a profit by selling tickets to look over the back fence."

But surely if Spark objects to the practice of geo-block busting it should crack down on its customer who use the likes of Unblock-us to access Netflix US, iTunes US, Hulu, BBC iPlayer etc — taking profits from Sky TV, which holds rights to a lot of those shows, in the process.

The hypocrisy echoes Spark's attack on Netflix for not charging GST and billing to an offshore subsidiary in order to (in Spark's view) avoid tax — when at the same time the 50% Spark-owned Southern Cross Cable Ltd is incorporated in Bermuda so the company's minority investors can reap tax efficiencies.

Is it legal?
As NBR has noted, CallPlus took legal advice from Lowndes Jordan principal Rick Shera before it launched Global Mode and before it made it open to all customers. Mr Shera likens accessing Netflix from New Zealand to parallel importing and says Global Mode is in accordance with the Fair Trading Act, Copyright Act and other laws. Chapman Tripp partner Justin Graham leans in the same direction.

"I’d expect to see increasing activity in this kind of space. It is consistent with New Zealand’s policy on intellectual property, parallel importing and geographical restrictions, namely that geographical restrictions are not consumer-friendly and New Zealand consumers should be able to access copyright content in a competitive and cost-effective environment," Mr Graham told NBR.***

Global mode services let you skirt old-school exclusive distribution monopolies, not bust copyright. You still pay your money, and content makers still get their slice. To ban global mode — if that ever proves legally and technically possible — will simply push a lot of people back to piracy. That would be a pity. Survey after survey comparing Netflix traffic to BitTorrent (largely pirate) traffic has shown that given the choice, most people are happy to pay.

Can't win the war
Local outfits have got to be in the streaming game, but harassing CallPlus won't get them far. Spark, Sky TV, TVNZ and MediaWorks can win a battle, but they can't win a war. 

Broadband is only going to get better and streaming (yes, often a hassle today), is going to get easier and easier. And Netflix is going to make more and more content available globally. Ditto Amazon Prime and other contenders. People will always find a way to get to Hulu (co-owned by the major US networks) to stream the latest US content, or BBC iPlayer for UK shows. And so on.

That doesn't mean off-shore streaming services are going to steam roll everything in front of them.

Netflix, for example, has said it has no interest in sport, local news, reality shows nor, given the size of our market, is it going to make any original series in NZ (although it could well bid for exclusive rights to NZ-made programmes or movies). That leaves a lot of scope for local players. Almost every genre that tops the ratings for Sky, TVNZ and MediaWorks is one that Netflix won't touch.

Accentuate the positive
The four companies I'm bagging today for their legal action have also made a number of positive moves recently.

Spark's Lightbox has formed Lightbox Sport (a joint venture that has subsumed the former Coliseum Sports Media), and will integrate it into a single Lightbox platform. It's started to spend some serious coin, lifting Lightbox first-year budget from $20 million to $35 million — in part thanks to the the Coliseum deal, in part though an ambitious drive that sees Lightbox free for a year to 600,000+ Lightbox customers. It'll need to spend a lot more, and endure years of losses. But going after A-list sports and expanding its partnership with TVNZ (as announced yesterday) is a sound strategy. Weaving sports and entertainment content together would be something of a world first for streaming video on-demand. It's original, progressive stuff and it could just work. 

TVNZ and MediaWorks, along with Maori TV, are set to launch FreeviewPlus mid-year. That will let you access their respective on-demand services from a single smart TV app, Freeview box or tablet. It has shades of my favourite streaming service, Hulu. Good stuff. Convenience is one of the ways to win the streaming war (NBR asked Sky if Prime content would be available on FreeviewPlus. The answer: "We haven't been invited yet").

And Sky TV has defied expectations by making the new series of Game of Thrones available on its Neon streaming video on-demand service. The broadcaster also deserves a nod for unbundling Super Rugby, NRL and Formula One for its new Fanpass.co.nz service. It's not perfect by any means. Neon has no high definition option, and Fanpass is expensive. And Sky probably had one eye on the new HBO Now service (which will likely be readily available to geoblock-busting Kiwis) with its Thones move. But overall the company, which has made such fat profits from its traditional business for so long, and still does, is now looking more and more serious in its attempts to lure new generation of viewers.

More of these carrots please. And drop that stick. 

Follow @ChrisKeall

* When CallPlus introduced global mode, with Slingshot, it initially pitched it as a service for a household who had a guest from overseas who happened to belong to an off-shore content service. It later made global mode a service for all Slingshot and Orcon customers.

** It's doubtful such a crackdown would be practical on a technical level, just as Netflix says it's not possible to block those using VPNs and other geoblocking tools. Spark could, however, at least communicate with its customers that it considers the practice of accessing geo-blocked content like Netflix US illegal, should it want to go to war with its own customers ...

*** The Chapman Tripp comments were made a couple of years ago, in relation to a global mode offered by short-lived ISP Fyx, but the principles remain the same (Fyx was shutdown shortly after its parent company was bought by Australia's Vocus. Vocus said it wan't to focus on the wholesale and corporate market, which it did).