The relationship between Netflix and curated content
Lately, both the consumer press and some in the IFEC world began referring to airlines “offering Netflix inflight” and opened discussions about whether airlines might replace curated content by offering Netflix. That deserves some examination. Do airlines license content rights and services from Netflix?
This year, Netflix—the world’s largest OTT provider of streamed media—began offering a new service called “Netflix Inflight 2.0” that ostensibly provides more efficient encoding that could potentially lower bandwidth requirements as well as streaming costs for airlines, and help airlines improve the viewing experience of online content for Netflix subscribers inflight.
Netflix was motivated by their objective to make Netflix available to subscribers “anytime, anywhere.” But the inflight experience—where some airlines or connectivity providers actually block video streaming sites to make bandwidth available to passengers for email—was a major exception to this. Limitations on bandwidth often compromise the quality of streamed content on aircraft. Kudos to Netflix for attempting to improve the inflight streaming experience.
In reporting this, both the consumer press and some in the IFEC world began referring to airlines “offering Netflix inflight” and opened discussions about whether airlines might replace curated content by offering Netflix. That frame of reference deserves some examination on the part of those of us who provide inflight content services as the impression often created is that airlines license content rights and services from Netflix. They don't.
It is important to understand the nuances of what is an IFE service (in which an airline actually licenses public performance exhibition rights) versus what is a connectivity service (in which airlines provide passengers with a connection that enables them to access OTT content that they subscribe to directly).
OTT’s like Netflix use a B2C model, not a B2B one. They do not sell their OTT content service to airlines – only to consumers. The only kind of agreements that OTTs can actually engage in with airlines have nothing to do with the licensing of content, but only with the support for the delivery of those streams via connectivity. Since Netflix is availble to "subscribers only" then only subscribers can log on to Netflix inflight, just as on the ground. In North America, more than half of households subscribe to an OTT service and more than half of them subscribe to Netflix. But this means that perhaps fewer than one in three passengers in North America have a Netflix subscription.
Connectivity was indeed the basis of an arrangement made by Netflix with Virgin Australia and other arlines. The airline does not license content from Netflix—it only makes an agreement to utilize the Netflix Inflight 2.0 stream when a passenger onboard the aircraft connects to his/her Netflix account. The content licensing is between Netflix and the individual subscriber. The airline provides the pipe, not the content.
Then why doesn’t Netflix circumvent the connectivity hurdle altogether by offering airlines an onboard server filled with cached content for subscribers to access? The inside of an aircraft is, as defined by law, a “public performance” venue. Content can only be exhibited by an airline on board the aircraft if the airline obtains public performance rights, and only the proprietors of such public performance rights can license and provision content for in-flight exhibition via an IFE system.
Typically, independent OTT providers do not hold IFE rights to the preponderance of the content that they offer to subscribers—including most “original productions.”
From an airline or CSP perspective, as connectivity bandwidth increases, and the window between IFE availability and OTT availability narrows, the ratio of content accessed through connectivity versus the content accessed through the IFE system may increase, and the kind of balance between the two becomes a strategic curation decision for those of us offering content services.
As content service providers, guiding airlines in their content offerings, finding the right balance between cached and curated content licensed for all passengers, and passengers' own content that they've subscribed to for their own access will be important.