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Online Video Piracy: Serious Threat or Seriously Overblown?

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“Because we are not so much on the monitoring side, from NexGuard, we don’t really have statistics available. But, for instance, you could look up a piracy report from Carnegie Mellon, which actually used data from movies over a long number of years. They concluded that revenue from those movies would increase more or less, let’s say, around 15 percent if piracy wouldn’t be there,” Tholen says. That’s true, but the report doesn’t look at the increase or decrease of various types of piracy or the effectiveness of counter-efforts.

Where does NexGuard’s assertion that piracy is growing come from? “I would say anecdotal evidence; I wouldn’t be able to give an exact statistic,” Tholen says.

Content owners are concerned that people use live streaming services such as Periscope to watch the latest episode of Game of Thrones or premium sporting events, Tholen says. That was a widely reported occurrence for the May 2015 Mayweather-Pacquiao fight, but there hasn’t been any news of similar illegal Periscope streaming since then. Where does this concern come from? How many people are watching Game of Thrones on Periscope?

“I wouldn’t be able to give you that statistic. The only thing I can tell you is that our customers express the concern,” Tholen says.

NexGuard also has no numbers on the effectiveness of its service. Yet it works with all six major Hollywood studios, selling digital watermarking embedders that go for $25,000 apiece.

“We don’t guarantee anything,” Tholen says. “This 15 percent ... is about $1.3 billion per year, so if only the studios could reduce the piracy by 10 percent [of that], that would be $130 million. That means that, indeed, by paying a small amount of that to us, they can, in principle, [save money] if they prevent 10 percent of piracy...”

Yes, the studios reducing piracy by 10 percent would yield savings. But NexGuard has no idea whether or not its customers are reducing 10 percent of their piracy. “Whether that’s a good investment, we don’t presume to know,” Tholen says.

The picture is so incomplete, NexGuard can’t be sure it’s saving customers any money at all.

A Light in the Darkness

Some industry observers argue that there actually is a method that drastically reduces online video piracy. The companies selling piracy solutions don’t talk about it much. It’s not on their product roster. What helps in a measurable way?

“Netflix,” says Ernesto Van der Sar, the founder and editor-in-chief of news site TorrentFreak. “The best anti-piracy solution is just to make sure that people can watch content at a decent price. All the legal channels are the best piracy solutions.”

A visit to TorrentFreak offers all the data that the content protection companies are missing. A story by Van der Sar explains how piracy is shifting from P2P activity to direct download and streaming sites. It sources a report from piracy tracker MUSO that sampled data from more than 200 million devices and monitored traffic to 14,000 piracy destinations. That’s better than anecdotal data.

“It’s definitely a problem,” Van der Sar says. “There are people who aren’t paying for stuff they watch. My view is that most of the people who aren’t paying and who are pirating probably wouldn’t pay if they couldn’t pirate. There are definitely issues, but I think that the difficult part is how are we going to solve it?”

After covering the area closely, the only solution Van der Sar has seen make an impact is providing affordable, legal alternatives. When Netflix moves in, piracy goes down. Netflix began service in Australia in 2015, for example, and pirate activity fell noticeably. Netflix doesn’t eradicate piracy, Van der Sar says. Its selection of movies is often skimpy, so people pirate the content that isn’t available on it.

Would it make economic sense, then, for studios to follow the music industry and put more desirable content into subscription services? Almost certainly not. Studios now follow a windowing schedule that maximizes returns by putting premium content into various channels— such as DVDs, pay TV channels, and video on demand (VOD) stores—on a schedule. If studios were serious about slowing piracy, they’d go in the opposite direction, but that would substantially reduce their revenues.

“Look at music: Piracy is much less of an issue,” Van der Sar says. “Most streaming services offer pretty much every popular song out there. Generally speaking, if you have an account you can listen to anything you like. But with video it’s totally different. We just ran an article last week: Not all the Oscar winners of the last 2 decades are available on Netflix. Those are the best movies, right? That’s what people want to see, but none of them are available on Netflix. They are available because the counter-argument of the industry is that pretty much 99 percent of the content is available, which is true, but you have to use 44 services to watch it all.”

The studios put most of their efforts toward keeping new releases out of piracy channels, since an early leak can have a dramatic impact on box office returns. After that period, however, online piracy is a cost of doing business.

“We’re going to see a lot more piracy in the future. Not necessarily in the U.S. where the legal offerings are good, but there are all kinds of markets coming online right now. Developed countries and India is where we see a lot of growth in the piracy area,” Van der Sar says.

A Game of Hacking

While there are no stats proving that anti-piracy services have a positive impact, one expert thinks they might actually make the situation worse. According to Richard Cooper, director of video media for business intelligence company IHS, the obstacles these companies offer are seen as a game. Around the globe, hundreds of thousands of people try to break content protections as a hobby, he says. If one person’s solution doesn’t work, someone else will have a different method.

“The problem here is that what a lot of these anti-piracy solutions actually present is a challenge. A lot of people engaged in video piracy, or at least hacking video piracy, breaking the DRM and so forth, are doing it for the kudos. They see every new anti-piracy measure that comes out as a challenge and something that needs to be cracked. This is their hobby. The first person to come up with a solution to any new anti-piracy measure gets to brag about it on whatever forum they happen to be on,” Cooper says. “They’re basically trying to break these anti-piracy measures as a means of acquiring status. Once, of course, they are broken, it does mean that they can be used in order to generate some content.”

While he agrees that subscription VOD (SVOD) services such as Netflix help reduce piracy, especially for average viewers simply looking for an evening’s entertainment, Cooper notes that they don’t carry TV and new movie releases. That means they can only have a limited impact.

“Living with it, I think, is probably the most effective way of dealing with it, and enabling consumers to get hold of content through the widest possible volume of platforms within the windowing structure,” Cooper says. “Piracy is something that the business has lived with for a very long time—pretty much since its inception—and it’s going to have to continue to live with it for the foreseeable future.”

Until the window release schedule stops working and studios make more content easily available, that’s where we stand. Yes, online video piracy is huge, but it’s also a manageable cost of doing business.

This article originally ran in the June 2016 issue of Streaming Media magazine as “Video Piracy: How Real Is the Danger?”

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