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Online Video Piracy: Serious Threat or Seriously Overblown?
Video piracy is widespread, but there's no consensus on how big the problem is or the best response to it. Are the biggest media companies in Hollywood throwing their money away trying to fight it?
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Imagine that a company offers to sell you penguin insurance. It guarantees that if you pay a high fee, no penguins will attack you. You pay the fee. No penguins attack you. Did the insurance work?

But that’s a ridiculous example, you protest. You can see this is an article questioning the threat of video piracy. Does this magazine really mean to say that video piracy doesn’t exist? Of course video piracy exists; it’s everywhere.

That’s true. Here’s a better example: Imagine hordes of vicious penguins attack you every day. You pay a company a high rate for penguin insurance. The penguins keep attacking anyway. In fact, there are more of them every week.

Such is the case with video piracy. Premium content owners need to protect their content from piracy, but no solution or combination of solutions has been shown to be effective. So how much of a problem is video piracy, and what’s the best way to combat it? We spoke to content protection companies and industry pundits to find out, and the answers aren’t always pretty.

Statistics and Sales Materials

The companies in the premium content protection business have a lot of statistics about the growing threat of video piracy. Piracy covers everything from a TV viewer who turns to BitTorrent for a missed episode of Quantico to companies that sell their own set-top boxes capable of receiving hundreds of pirated live TV streams.

As of March 2016, digital platform security firm Irdeto tracks more than 850 pirate sites, with 50 new sites launching every month. In the previous 6 months, it saw a 45 percent increase in pirate site creation.

Those sites see a lot of traffic. In March, the top 20 pirate sites received an average of more than 7,600 visitors per month, Irdeto finds. That average increases by more than 750 visits per month. It’s a global menace, Irdeto’s sales materials explain.

“Video piracy encompasses a number of different threats. There is P2P [peer-to-peer] piracy through a file-sharing protocol, such as BitTorrent,” says Lawrence Low, vice president of business development and sales at Irdeto (right). “From our figures we have seen, between 2014 and 2015, a greater than 50 percent increase in activity on P2P networks. That’s been a long-standing threat to video content.”

While that’s the best known type of video piracy, there are plenty of other methods, such as cyberlockers. These are sites, created before P2P technology, with long lists of links to pirated material. Viewers simply click the link for whatever they want and download it directly. As storage costs have come down, cyberlockers have become more popular.

Pirates monetize their traffic through Google AdWords. The sites themselves come and go, often centering around major sporting events.

“[Cyberlockers] make video piracy easier for end users,” Low says. “Those threats are also interesting in that anything with a website, such as a digital direct download site with linking sites, has the ability to support itself through web-based advertising. With the prevalence of web advertising, there is now a mechanism for the pirates to monetize that traffic.” The use of these sites is also on the rise, Low says, but he didn’t provide numbers.

Irdeto has been especially vocal about the rise of companies offering pirate set-top boxes with low-cost subscriptions to hundreds of live channels. It has hosted a suite called the Piracy Lounge at several trade shows, explaining how shady companies make big money by providing set-top boxes and bundled services.

“One of the places where we are seeing emerging threats is in IPTV [Internet Protocol television] set-top boxes,” Low says. “With the widespread availability of quality bandwidth to the home around the world and the prevalence of IP streaming devices, the manufacturing costs of these devices have come down dramatically over the last few years. The technology is widely available. This manufacturing capability combined with the greater availability of bandwidth to the home makes it easier for pirates to re-task boxes—IPTV streaming boxes—[and] add their own services to create a Netflix-like experience, but with pirate content. Again, that is another major threat.”

For an example of pirate OTT services, look at 2rokumexico.com, which provides access to hundreds of premium TV, movie, and sports channels for a low monthly price. Or look at iptvforall.com, which does the same, with an emphasis on adult channels. With customer acquisition and equipment costs of around $100 per subscriber and charges averaging $500 per year, companies can clear $400 per year on each customer.

NexGuard, which also offers video piracy protection, points to a Carnegie Mellon University study from February 2016 on the costs of video piracy to Hollywood. The authors examined wide movie release data from 2006 to 2008 and showed that box office revenues would have grown by 15 percent ($1.3 billion per year) if video piracy didn’t exist. They then used data from 2011 to 2013 and found that box office revenues would have grown by about that same amount without piracy. The study only examined box office sales and didn’t look at the effect on home video or other licensing options.

The Need for ‘Constant Vigilance’

The threat of online video piracy is real. There’s no doubt: It manifests as everything from simple one-off, scofflaw downloading to organized businesses pulling in big money. And it does hurt the bottom line of creative professionals who make that content in the first place. This is clear. What is unclear is the effectiveness of the current solutions.

“When looking at [pirate] sites, we look at the impacts that we have on sites. Sites get shut down, but this is the internet and they do set up new sites,” Low says.

That gets to the heart of the problem. Even when anti-piracy services have a victory—getting a pirate site removed—it’s easy for the pirates to organize somewhere else. The effort starts to feel like a giant game of whack-a-mole.

For Irdeto, the inevitability that pirate sites will reorganize and sprout up somewhere else validates the need for its services.

“That does happen. This is the internet,” Low says. “This is why constant vigilance is required on shutting down sites, or making it less of an attractive experience for the end user.”

Anti-piracy companies sell their services to major entertainment studios. While Irdeto and NexGuard wouldn’t say what they charge clients, they did talk about what they show clients to validate their services. Compliance rates is one of the main items, Low says. That means the number of cease-and-desist notices Irdeto sends to internet service providers (ISPs) and host sites, and the number of requests that have yielded responses. Irdeto sends notes to ISPs to get pirating sites shut down and then measures how many hosts have complied with those requests.

Besides takedown requests, one of the main tools in both companies’ arsenals is digital watermarking. With this, Irdeto or NexGuard places an invisible watermark in live video streams. Every viewer gets a stream with a unique watermark, which makes it easy to tell where pirated streams originate. Irdeto simply examines the watermark on a pirated video stream and then directs the broadcaster to stop serving the customer that’s doing the pirating. Irdeto asserts that this works well but isn’t able to provide numbers showing its effectiveness.

“Watermarking has an impact, but there’s proprietary data that we are not in a position to share,” Low says. “We have seen a quantifiable, measurable, direct, timely impact from the use of session-based watermarking.”

Without data, it’s impossible to know how effective digital watermarking is. And there’s the very real possibility that the effort is only a temporary solution, with pirates setting up with a new stream or even finding a way to remove the watermark.

NexGuard also provides digital watermarking. According to Harrie Tholen, the company’s managing director and senior vice president for sales and marketing (right), P2P piracy is the most common type, but pirated streaming services are on the rise. However, NexGuard doesn’t do monitoring, so it doesn’t know even roughly how much activity is taking place.