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relates to Tesla to Launch Solar Roof Business in Europe Next Year relates to Battery Startup With $4.5 Billion Plan Has Vision for Nordic Hub relates to Top Equity Hedge Fund Cashes In on Online Dating relates to Facebook’s Libra in Focus as U.S. Group Visits Switzerland relates to What Your Snapchat Selfie Has in Common With the Army relates to CDC Looking Into Pulmonary Illness Linked to E-Cigarettes relates to SoftBank to Lend Employees Up to $20 Billion for Fund, WSJ Says relates to Amazon, Swatch, Daimler and the Risks of a Global Recession relates to Novartis CEO Says FDA Process Could Have Been Handled Better
Photographer: David Paul Morris
technology

This Is the Chart That's Freaking Netflix Out

Popcorn Time, an app for watching pirated video, may pose the biggest threat Netflix has faced to its dominance

This Is the Chart That's Freaking Netflix Out

Popcorn Time, an app for watching pirated video, may pose the biggest threat Netflix has faced to its dominance
Hastings spoke during a session of the President's Council on Jobs and Competitiveness in Palo Alto, Calif., on Aug. 2, 2011.
Photographer: David Paul Morris

In a letter to shareholders (PDF),  Netflix has highlighted what it describes as a "sobering" trend that's occurring in the Netherlands. The letter, posted on Netflix's website along with an earnings report that sent the stock price up as much as 16 percent, included a link to this chart, which shows Google search traffic in the European country.

relates to This Is the Chart That's Freaking Netflix Out
Courtesy Google.com

What is Popcorn Time, and why does Netflix think it's important enough to tell investors about? Popcorn Time is one of the most popular services for watching pirated movies and television shows right now. It's often called "the Netflix for pirates" because of how easy it is to find and stream illegal content. The software is available for every major computer and smartphone operating system, including the iPhone—if users are willing to violate Apple's terms of service and "jailbreak" their devices. 

Popcorn Time has found an unusually fervent fan base among the Dutch. The Netherlands is the second-largest market for the app with 1.3 million downloads, according to the blog TorrentFreak, citing developer Time 4 Popcorn. That would be about 8 percent of the country's population. Netflix and HBO, which both offer online services in the Netherlands, don't break out subscriber numbers there.

The Netherlands is an unusual case. In many markets where Netflix operates, the service is much more popular than Popcorn Time, according to Google data. But free networks that are too good to be legal can quickly go global. After all, the Napster revolution started on college campuses, and Pirate Bay, which was raided by police last month, was initially a quirky Swedish export. The U.S. is Popcorn Time's biggest market, with 1.4 million downloads as of September, according to TorrentFreak. Time 4 Popcorn didn't immediately respond to a request for comment.

In the letter (PDF), signed by Netflix Chief Executive Officer Reed Hastings and Chief Financial Officer David Wells, Netflix is trying to make the case that piracy—not HBO or Hulu—is the real enemy. "Piracy continues to be one of our biggest competitors," they wrote.

This is not a new message. Netflix executives have been publicly making this case since at least 2005, when the company's main business was shipping DVDs through the mail. It's a classic Steve Jobs argument, the one he used to convince the music labels to sell their songs for 99¢ a pop. "We have a far superior experience than Kazaa," Jobs said in a 2003 interview with Esquire. Popcorn Time is showing that, as the legal options improve, so do the illicit ones.