Why Popcorn Time Scares Netflix

The free video-streaming upstart is starting to rival the larger site for traffic in some countries, but it isn't necessarily doing anything illegal.

Popcorn Time

In January, Netflix, the online video streaming site, used its quarterly letter to shareholders to take aim at a rival. Not the premium-cable channel HBO, with which it's locked in an increasingly bitter battle for the best shows and movies; nor the cable provider Comcast, with which it's squabbled over the future of the Internet. Rather, Netflix’s missive called out a new adversary. “Piracy continues to be one of our biggest competitors,” it reads. “Popcorn Time’s sharp rise relative to Netflix and HBO in the Netherlands, for example, is sobering.”

Popcorn Time is one of the most fascinating sites on the Internet at the moment. It's a platform that allows people to access vast swathes of video content without paying for it, but with a clean, legitimate-looking (and somewhat Netflix-y) interface. In other words, it isn't a shady-looking portal that makes the user feel like they're engaging in illegal behavior by logging on.

By some estimates, Popcorn Time’s user base in the Netherlands rivals that of Netflix. It also appears to be quite popular in the U.S. Bloomberg reported last week that usage of the service in the U.S. more than trebled between July 2014 and January 2015, and it now accounts for one-ninth of all torrent traffic in the country. Its rise reflects a sobering reality for the entertainment industry. Despite the widespread success of Internet-based content smorgasbords with simple pricing models like Netflix, piracy endures. And TV and movie piracy, at least, is almost impossible to wipe out.

Unlike in music, where services like Spotify offer a single subscription for almost any track the user might want, there's no one-stop shop for video. That’s partly because of the way licensing works: Movies are released at different times for theaters, video-on-demand, and then cable-TV or streaming services. It’s partly also because, unlike in music, video-streaming services have chosen to compete with each other by offering their own exclusive content rather than trying to have the most complete menu. As a result, the best products remain spread out across a confusing phalanx of outlets.

Web Search Interest in the Netherlands—Last 12 Months

(Data: Google Trends, normalized and presented on a scale from 0-100)

Popcorn Time, according to people who use it, lets you access just about everything on the Internet. It operates using the BitTorrent protocol, a file-sharing method that breaks large files into small pieces, which are shared out across the network of its users’ computers. When a user wants to download a file, her computer assembles it from pieces stored on other people’s computers across the network. This makes it easier to download large files, and harder to pinpoint who's responsible for uploading them—and thus almost impossible to eliminate. (The main difference between Popcorn Time and traditional BitTorrent is that when you choose a file to watch, BitTorrent assembles it first and stores it on your computer’s hard drive; PopcornTime just streams it as its components come in.)

The site emerged seemingly out of nowhere last year. The people claiming to be its creators wrote that it began as a challenge by “a group of geeks from Buenos Aires who wanted to see if they could create a better way to watch movies.” By March last year they had abandoned it because, they said, they “need[ed] to move on with our lives."

Others quickly took up the baton. There are multiple Popcorn Time sites now; popcorntime.io is the biggest, it has the most likes on Facebook (it passed 100,000 recently) and it appears at the top of Google searches. It has a desktop client for both Mac and Windows computers, plus a Linux version and an Android app.

So who is behind this slick operation? Last month, I spoke to a person who claims to be Popcorn Time’s official spokesperson, a 20-something from Ontario called Robert “Red” English. He says that there are about 20 people—programmers and designers—scattered across the planet, working on Popcorn Time in their free time. It's an open-source project, so anyone can submit changes to the code, add features, and fix bugs. If he and the rest of the team think a contributor is helping, they will ask him or her to join on a more formal basis. Contributors change frequently.

Popcorn Time has no funding—it’s run out of the pockets of the small community behind it—and no business model, English says. Unlike other platforms used for piracy, it doesn’t even carry advertising. "We are a community and we are not really driven by the money of it," he says. "I don’t think it will be ever turned into a proper business." In other words, there are no plans to emulate Napster or BitTorrent and seek legitimacy. Napster, the first file-sharing site to gain prominence, had a string of legitimate business owners after being shut down, including German Media conglomerate Bertelsmann and U.S. retailer Best Buy, and is now part of streaming music provider Rhapsody. BitTorrent (the company, not the protocol) is backed by venture capital funds including Accel Partners.

So if there’s no money in it, why do the people behind Popcorn Time bother? Fun, mainly, English says. “A lot of the project is about showing … other companies like Netflix that having the content that’s currently on air—the new stuff, not last season—that’s what drives people to watch. It’s a way of showing the media that you can do better.”

The team behind the original Popcorn Time insisted they had checked “four times” with lawyers that the service was legal. English says his team has been in contact with lawyers, “but for the most part there is not a lot we need to speak to them about.” Popcorn Time doesn't control or manage any of the content that is accessible through the service; it just provides the method of access. “We are not selling you a product, we are not ripping you off," he says. "We are just giving something out for free."

The video and music industry see things differently. There have been countless lawsuits against BitTorrent services and their users. Some, notably in Sweden, have been successful, even ending up with convictions. But in the U.S., as Mother Jones reported a year ago, judges have been getting more skeptical about the evidence copyright holders present. Basically, an IP address—a number that identifies each computer connected to a network—is no longer considered such a reliable indicator of who has been actually downloading or uploading files.

The Motion Picture Association of America (MPAA), a trade association for Hollywood studios that's been involved in many lawsuits against copyright offenders, declined to comment on Popcorn Time to Quartz. So did Netflix. But Parker Higgins from the Electronic Frontier Foundation, a consumer digital rights group, argues that Popcorn Time is no more illegal than photocopiers or videocassette recorders. The US Supreme Court ruled in 1984 that Sony’s Betamax video recorder wasn’t illegal because it was capable of “significant non-infringing use.” Similarly, Popcorn Time can be used to navigate vast swathes of non-copyrighted material, Higgins explains. “If it’s used to infringe copyright, that may itself be a violation, but that doesn’t make the tool illegal.”

The Betamax defense isn’t iron-clad. At least two file-sharing sites that tried to use it—Grokster and Streamcast—lost, because the court ruled that they actively encouraged piracy. But that case also marked out a territory within which file-sharing is legal, making it easier for sites like Popcorn Time to stay (just) on the right side of the law.

English says the team behind Popcorn Time is aware that the platform is being used extensively in places like the Netherlands and “had a general idea that people were beginning to talk about us.” But what he didn't realize was that it was starting to get noticed on Wall Street.

Investment analysts are concerned about its impact on Netflix and other big entertainment companies that produce and own content. BTIG analyst Rich Greenfield for one, has repeatedly warned that “Hollywood should be very afraid” of apps like Popcorn Time, which he says could threaten the financial strength of the entertainment business. “The reality is TV everywhere [i.e., online services from US cable TV providers and channels such as HBO Go] has gone nowhere while the piracy sites such as Popcorn Time have continued to innovate,” Greenfield says in an email.

Popcorn Time doesn't track usage and isn't particularly concerned about the imitators it has spawned. “In general we don’t care,” English says, “but when it comes to the ones that install viruses on your computer it pisses us off because it ruins a good name.” To think that a group of earnest freelancers working in their spare time could pose challenge to Netflix, a $30 billion company, not to mention media giants that have been around for decades, is staggering. But as long as the big TV and movie studios continue to limit their content to certain online platforms, there’ll be demand for a service that provides it all in one place—especially if that service is also free.