EDIT: On Android 7.1 VLC for Android, was able to "open" (duration etc) a large file I found in Netflix directory (.hidden), though not decode sound or video. There were two smaller files besides I suspect are audio tracks. And several other very small files, subtitles maybe.
Most likely what they've done is stored the video chunks locally and then the Netflix app is "streaming" these chunks from the local storage rather than the netflix servers. If you looked through the folder that holds these chunks, you'd probably just see a bunch of randomly named 100mb files. That's all the DRM they need, you have no ability to consume these files without the Netflix app.
Plus, the owner of the Android/iOS device is paying for that content anyway, why would it be in any way a problem if he can open that downloaded file in another software?!?!
I agree that DRM is a waste of time and the pirates are going to get the content whatever happens, but a $10/m streaming service is only licensing you to watch video in a few specific scenarios. If you had spent $3 an episode (or whatever it is on iTunes/Google Play these days) to own it, then I'd expect a DRM free file to be available (Though I doubt you actually get one in reality).
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This is like saying that .doc files are as good as DRM'd, since who's going to open one in anything but Word?
I get what you're saying but it's a security through obscurity argument - if this takes off, of course someone can figure out the encoding and transcode straight from those files.
You can write a stream to file with maybe 2 commands, and try to decode it later.
If the DRM on the stream is broken, you can save the stream to file and decode it later. If the DRM on the stream is safe, then it should be equally safe between the stream and saving the file to disk.
I fail to see how letting you save encrypted stuff to local disc has anything to do with breaking the DRM.
Also, the first thought people have when given a new service for free is "how can I use this to pirate movies". This is why we can't have nice stuff.....
If you don't think that makes quite a real difference in enabling or incentivizing actual piracy then I think I'll just disagree - that rate limit is a huge difference in my book and makes it far more likely for someone to take the trouble to rip and transcode.
(Which you can confirm by fast availability of streamed content on torrent sites or if you actually test the streams.)
Your second statement (about torrent sites) implies that everyone was already "downloading" content and NetFlix's servers were happy to serve the streams as a single very fast download without regard to how long it should takes clients to consume that (i.e. no throttling) - is this correct?
But I still see some risk for Netflix there... Split files are made to be whole again.
If you had only one movie stored locally, you would very quickly be able to solve the puzzle.