Leak of 'Orange' episodes unlikely to hurt Netflix

Scene from Orange Is The New Black. Photo / Supplied

After a hacker group leaked new episodes of Orange Is the New Black on Saturday, you may have expected investors to flee the company's stock.

But analysts say Netflix will weather this storm rather easily. In fact, the company's stock price rose more than 2 percent Monday despite the hack. Here's why investors may be sunny on Netflix in light of the incident.

For one thing, it isn't as though viewers of Orange Is the New Black are about to cancel their subscriptions just because they can get for free what they were paying for.

Orange Is The New Black. Photo / Supplied

Netflix is likely to keep getting subscribers' money, said Laura Martin, an analyst at the asset management firm Needham & Co.

And while Netflix might be concerned about potential customers seeking out free, pirated content rather than paying for it, she added, most Americans - roughly 54 percent, according to Leichtman Research - already have Netflix.

"[The leak] slows subscriber growth and lowers investment on return for that series because that series is now available off the Netflix platform for free," Martin said. "But owing to the high penetration of Netflix already in America specifically, I don't think it'll have a negative impact on current subscriber [numbers]."

What's more, it wasn't Netflix itself that was hacked, but Larson Studios, a postproduction company that has performed work for Netflix, Fox and ABC, among others. That helps distance Netflix from the fallout.

So if the hack won't affect Netflix much in the United States, how about internationally, where much of its growth is taking place?

It's certainly the case that Orange Is the New Black is one of Netflix's most popular shows. But Netflix is already designing original shows that target specific international markets such as Spain, Japan and India. Netflix chief executive Reed Hastings has said the company is exploring genres such as anime and Bollywood.

Cast of Orange Is The New Black. Photo / Supplied.

So even if the recent hacking hurts Netflix's performance overseas by encouraging people to pirate "Orange Is the New Black" rather than pay for it - which isn't clear, and may not be until the company's next earnings report - it is still cultivating a diverse portfolio of content aimed at attracting a massive international customer base, analysts say.

What's more, Netflix has always taken a somewhat unconventional view of piracy - acknowledging that the practice can and will happen, and essentially doing as much as possible to undermine it through a kind of asymmetric warfare.

For example, Netflix famously analyzed the most-pirated shows in the Netherlands to determine what customers there wanted to watch.

Then Netflix went and bought the rights to those shows, in an attempt to convince illegal streamers to switch to what it argued was a better TV service.

"We think the best way to eliminate piracy is to make content available to people simply, cost-effectively and in a way that they can understand, that works across devices," said a Netflix spokesman, speaking on the condition of anonymity to discuss the hack.

Netflix has pointed to declines in peer-to-peer file-sharing traffic over the Internet as evidence that its strategy of co-opting pirates is working.

And then there's Netflix's own army of fans, who are urging other viewers not to pirate the leaked episodes of Orange.