One upon a time, movies were released in different countries at different times. This could be done because there was no easy way to copy and store away a movie. If you lived in Italy, you could wait up to two years before you saw a popular movie. Then two things happened: it became easy to copy and store movies; and everybody in the world suddenly became interconnected. The regional segregation ended: the only ones to believe that it's still there are the dinosaurs from a past era.
First of all, I want to clarify that I am not here to talk about how torrents have changed everything. While I like the idea of thousands of people connected to a decentralised network in order to exchange information, I also understand that downloading a movie using torrent is illegal. We can argue all we want about the ethics of it, the social injustice, the acts of disobedience, the injustice of summary letters sent out demanding payment and ruining families, and so on. The moral of the story is that downloading copyrighted movies is illegal, has always been, and will likely always be.
Here I am talking about fully legal streaming services, where you pay a monthly fee to access contents. You are paying for the right to watch the movie. It's business as usual: the streaming service gets a cut, the movie producer gets paid most of it, and the artists behind the movies get the crumbs. It's only $7 to $10 a month because it actually doesn't cost them anything to distribute the contents, and because we are talking about really big numbers in terms of customers (40 million Netflix users).
The contents dinosaurs are using technology to create an Internet with geopolitical borders compatible with their licensing deals. When you connect to the Internet, you are assigned an Internet address, or an IP address. Using your IP, it is possible to have a reasonable idea of where you are geographically, and a nearly certain idea of the nation you connected from.
This is the mechanism used by Netflix to offer, in Australia, only a fraction of the contents available to Americans.
The problem is that it's trivial for users to pretend they are somewhere else if they are slightly technologically inclined. For those who are not comfortable with the command line, there are slightly more expensive "IP tunnel" services which will basically do everything for them. The end result is simple: to anybody checking, you are coming from a different IP address; specifically, the IP address of the server you are using as a "bridge". If the server is in the US, as far as Netflix knows, you are in the US. The Google ads you see will change (I have to say, they become more interesting); the default language and settings are the ones given to a US client; and so on.
No wonder the president of Canada's Bell Media going insane, saying that Canadians using this technique are actually stealing just like stealing anything else. The trouble is that she forgets something very important: those users actually paid for the contents they are watching. It's hard to convince users that they are stealing, when there is a credit card charge every month on their statements.
So, what it is? If the contract you sign with Netflix (you know, the endlessly long "terms and conditions" screen nobody ever, ever reads) makes you state that you live in the US, you are breaching your contract with Netflix at best.
The next logical step for them is to call their puppet politicians, and do anything they can to make it illegal to circumvent geolocation system while accessing digital contents.
The trouble is that in order to do that, they would have to:
Make IP tunnelling illegal. This is hardly possible: people use tunnelling for all sorts of reasons, especially in the corporate world; if you are an employee of a large corporation, you might use tunnelling to connect to the company's network. Generally speaking, the IP you are using is more of a technological, routing issue rather than a legal issue.
Make it illegal to subscribe to digital contents in the "wrong" country. Again, this is hardly possible: it would be a contractual issue at best.
The media dinosaurs can definitely ask the digital distributor to make it harder for users to get around geolocation limits: they can impose Netflix to to check that viewers use a United States credit card (which would be easy enough to get anyway); or that they block accounts that access contents from two different countries in a very short time (which will only create a minor inconvenience to the user); or that customers provide evidence of US residency (which would generate a bureaucratic nightmare).
But in terms of making it illegal to watch Netflix US from Uganda, even with a hoard of puppets at your fingerprints in parliament, it's going to be an uphill battle.
It will take a while for those dinosaurs to realise that the digital borders they tried to create are crumbling without any hope of reviving them; when they do realise, they can consider some solutions:
Till then, happy tunnelling!