If you're a Netflix subscriber (or maybe even if you're not; this may be one reason why you don't subscribe) you're probably aware that the TV shows and movies available through their streaming service vary significantly from territory to territory. A lot of the big name TV shows appear on the North American service before they're available in Europe (and some considerable time before the Antipodes gets them, often up to six months). There are technological ways around this, some of which Netflix have started blocking in earnest this week. I'm going to talk about how this state of affairs came to be and try to offer an opinion of the legal aspects. Standard disclaimers apply: IANAL and I'm not going to get into a right vs. wrong, information wants to be free argument here.
Licensing and distribution deals done between Netflix and the content providers (the movie and TV studios) form part of the trickle-down of content from provider to consumer that used to be simply cinema->home video->TV for movies or TV->home video for TV. We've got more ways to consume visual media than ever before today and the media companies want to maximise the amount of money they can make from each vector, be that cinema, pay per view (there's still a lot of money in hotel and airline TV), subscription TV channels (HBO being the obvious example), digital rental and purchase (e.g. iTunes), streaming services (such as Netflix and Amazon), public broadcast TV and physical media sales such as DVD and Bluray. The media companies stage the release of content to each "tier" so they can generate as much revenue as possible. If you, as a consumer, are desperate enough to want to watch the new episode of Game of Thrones you'll pony up the cash and get an HBO or Sky Atlantic subscription. If not (or if you're somewhere where neither of these options is viable) you'll have to wait for to be able to stream it or buy the DVD boxed set. There's a also market forces at work around the world; some areas are willing to pay a higher price for content than others, so a media company may want to start physical sales of a popular show or movie in the areas where the market will sustain a higher ticket before it sells to cheaper areas. (This is the main reason we still see region locking of physical video media such as DVD and Bluray and video games).
The advent of high-quality, realiable, streaming video over The Internet (as with so many other things accessible over that medium, for good or bad) knocked the traditional distribution models out of whack. The Internet wants to be stateless, it doesn't care what country you live and, despite what CSI: Blackpool may want you to believe, it's actually quite difficult to pin down someone's physical location from an IP address. Once a show has finished airing on it's primary medium (for the sake of argument: a subscription cable channel like HBO) a media company will usually want to sell it on to foreign markets (again, for argument's sake, let say Sky). Sky funds it's purchases of these shows not only through it's subscription fees, but also through the advertising revenues from selling slots in those shows (that likely have a lot of viewers). Sky won't be happy if the show they paid a lot of money for is also available to watch (with no adverts, always preferable for most viewers) online from some subscription service. So, the media companies stage their releases and companies like Netflix have to try and geo-block their content, providing different libraries in different territories. This way Netflix subscribers in the UK can't watch that show Sky paid a lot of money for until Sky has finished broadcasting it and had all those adverts squirted into eyeballs.
Now, back to my bit about CSI: Blackpool and IP addresses: Netflix currently tries to restrict what you can access, as a subscriber, by guessing what country you're in based on your IP address and steering you to a particular content library. That library's content is based on the complex deals they have in place with the different distributors and that staged release system I talked about above. The amount of money Netflix pays the media companies to provide access to a show in a given territory is often based on the number of subscribers they have in that territory (although Netflix is notoriously secretive about it's viewing figures and everyone in Big Media is traditionally cagey about rights fees). As a Netflix UK subscriber you're part of the UK's headcount when it comes to licensing shows from a media company and your subs go towards funding the shows you can watch while in the UK.
This is where it gets a bit murky. Netflix don't dictate what you can watch based on where you live, but where you are located when you sign in to their service. This is why UK citizens holidaying in the US with their iPad or laptop will suddenly find themselves able to access the US Netflix library. Netflix licensed those shows to be able to be viewed by subscribers in the US, not by US citizens exclusively. A Netflix sub is a Netflix sub is a Netflix sub; there's no obvious distinction between subscriptions (albeit maybe slight variations in price) from one country to another and this leads a lot of people to question why they can't just watch everything Netflix has to offer, across the globe. Netflix don't have country specific accounts/subscriptions because it's a lot easier to restrict access to their services based on where you are on The Internet than the postal address of your subscription or credit card holder's address, both of which are trivial to spoof.
People figured out pretty quickly that if you were in the UK and somehow managed to appear to have a US IP address you could access all the US content. This is commonly done using a VPN or proxy server (the technical detail of these is beyond the scope of this article, get thee to Wikipedia) that's hosted in the country whose content library you want access to. A number of companies sprang up specialising in selling VPN services for accessing geo-blocked content. Unfortunately for them (and their users) the nature of The Internet's IP addressing system makes it easy to associate a block of addresses with these types of services and block access to your services from them; this is what's started happening this last week and Netflix subscribers around the world are finding their access to the US library blocked. Many people feel this is at the behest of the media companies who negotiate the distribution deals.
Are you breaking the law by using one of these services? Again, it's murky and it varies from country to country. Netflix pays money and signs legal contracts with studios to provide their content for different fees in different territories. The studios produce the content, they own it and they get to decide who consumes it, when, where and how much they charge the distributors (in this case Netflix) to get their piece of the action. By watching a show online that isn't licensed in your region you're certainly making life difficult for Netflix as they're struggling to uphold their end of the licensing deal they made with the media company. If, where you live, it's also illegal to attempt to circumvent digital media protection (such as region coding of games and DVDs) you may also be breaking the law by using a VPN or proxy to side-step Netflix's geo-blocking. Can you say "anti-trust"? Yes, you certainly can, but good luck finding a Judge who shares your point of view.
I argued recently that accessing content that's not legally available in your territory is essentially the same as piracy. Piracy (in this context, not the somewhat scarier "give me all your valuables or I'll shoot your wife and children" type) is usually concerned with downloading digital media you've not paid for. I argue that consuming content that's not been made legally available to you is essentially the same. The consumer is getting something they haven't paid for not because it was available and they made a decision not to pay for it but because it simply isn't available to them at that time or place. And at the end of the day it's the owner of that content who gets to decide the where and when, and reap the subsequent financial benefits of that decision.