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  • December 8, 2020
  • By Tim Pearson Senior Director, Product Marketing, NAGRA
  • Blog

Understanding the Serious Game of Piracy

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Piracy of valuable content continues to be a growing concern for the M&E industry. According to a recent report from NAGRA and the Digital Citizens Alliance (DCA), pirated IPTV services has grown into a billion-dollar industry in the United States alone. And, while many might downplay the threat by imagining a pirate service being run by a one-man shop out of someone’s basement, the reality is that piracy is big business. These illicit, well-orchestrated organizations are managed by groups of business-savvy individuals and supported by teams of highly skilled engineers, a sophisticated supply chain and cutting-edge marketing and distribution techniques.

To meet this challenge head on, it is important to first understand how the business of piracy works. To truly comprehend the piracy business, you must understand the various players and their unique roles in the piracy game. 

The basic model is not complicated. Pirates take stolen content and distribute it via the Internet directly to consumers. Because these providers pay nothing to the people who create and own the programming, they make a lot of money with little investment. Thus, modern day piracy is as much organized crime than casual access to illicit content.

In addition to the well-known impact on content owners and service providers, there are many additional layers to the piracy ecosystem. Some players are obvious, which includes the pirate retailers and wholesalers. Others play a more, often not realized, passive role, such as third-party vendors.  And then there are the consumers who don’t realize that a service advertising tremendous value may not be at all what it seems. Understanding the underlying interplay between these players is key prior to looking at how organizations can drive change – often as part of an industry coalition or alliance.

The Pirates: Wholesalers and Retailers

The pirate service wholesalers are the core players to any pirate operation. A wholesaler can best be described as the "head of the snake." As such, they make up a sizeable and lucrative piece of the illegal streaming ecosystem. Operating out of the public eye and comprised of many component parts, the wholesaler infrastructure is the most complex piece of the pirate ecosystem.

When it comes to content, wholesalers work within an intricate network that makes stealing and restreaming content possible. Because gaining access to thousands of channels of content is difficult and costly for one player, wholesalers often band together and either pay for content from another wholesaler or barter one content package for another to increase their offerings. 

From a technological standpoint, a wholesaler may be a fully integrated operation, gathering the feeds of the stolen channels, developing its own proprietary technology, and using its own servers and software to scrape Internet sources for stored movies and television shows for Video on Demand (VOD) services. However, it is more common for a wholesaler to outsource or barter for one or more of these functions to ensure expertise and resources are maximized.

With all components in place, the wholesaler operation then feeds the consumer-facing players – the pirate service retailer. 

The retailer advertises to the public, often through social media. They drive consumers to a storefront website where the user can download the app, buy a device with the app pre-installed, or otherwise receive instructions on how to access and pay for the services. There are approximately 3,500 pirate retailer storefronts that sell subscriptions to U.S. consumers. Many retailers cater to only several thousand customers, or fewer. However, a large retailer can extend to several million subscribers.

The retailers rely on others – most often the wholesalers - to steal the content needed and to build and maintain the technology platforms. Because the providers of pirated services pay nothing for distribution rights, their costs are extremely low, so they can bundle vast amounts of content into their offerings, often including extensive video on demand (VOD) catalogs in addition to live channels, for prices legitimate distributors cannot possibly compete with.

There is not a rigid division that separates wholesalers and retailers. Many wholesalers also operate storefronts from which they sell to the public. In fact, approximately 15 percent of the 3,500 retailer storefronts in the U.S. market advertise wholesale packages in addition to individual subscriptions.

The Supporting Cast: Third-Party Service Providers

However, the pirate retail and wholesale services cannot function on their own. The success of these criminal enterprises relies on a supporting cast of third-party bystanders that, knowingly or not, make content piracy possible.

Like any business, there are a number of services needed to be successful. This includes payment processors, including credit card companies, which are used by consumers to pay subscription fees. It also includes hosting providers and CDNs, which support pirate websites and their streaming video infrastructures. Then there are the website services and social media sites, such as Facebook and YouTube, that are needed by pirates to generate marketing momentum to drive viewers to professional looking storefronts. These services are not playing any active role in the piracy game; however, they are playing a passive role in making content piracy possible.

The Unknowing Victims: Consumers

We have all heard the old adage, "If it sounds too good to be true, it probably is." While this does not apply to all scenarios, it definitely applies to piracy.

Pirates make their money through subscriptions and advertising. They also make money by selling devices that are pre-loaded with apps offering stolen content. However, unbeknownst to most consumers, these are not the only ways illegal IPTV services make money.

Many pirates generate revenue by partnering with hackers to install malware within free apps that expose consumers to risk or theft of their personal and financial data, cryptocurrency mining, adware, ransomware, and botnets using computers to perform distributed denial-of-service attacks. Separate and distinct from the actual business of content piracy, these other revenue-generating activities are critical in making the economics of the pirate enterprise work.

The Fighters: Content Owners, Service Providers and Industry Associations

It’s important to recognize the industry players and collaborations that are working to stop pirates in their tracks. From rights holders and operators, to legislators and various industry associations, the industry is taking a more proactive and comprehensive approach to stay ahead of the pirates. Key to this fight is leveraging an impressive arsenal of proven anti-piracy technologies and services that protect valuable assets from getting into the wrong hands.

For example, forensic watermarking can be used to ‘traitor-trace’ content leaks back to the source. Scanning for watermarks can highlight the redistribution of content in seconds and enable illicit feeds to be terminated. In addition, the interplay of anti-piracy and legal services are being successfully integrated to meet the piracy challenge. This includes comprehensive investigations, tracing, intelligence and data analytics capabilities to identify the depth and breadth of the piracy problem alongside its geographical spread. When combined with watermarking, and effective technologies, such as IP-blocking, website blocking and DNS redirection, the solution delivers impressive results as NAGRA reported in June 2020 where all these aspects were used to bring down an international piracy ring.

With the right anti-piracy strategy and ability to execute in place, pirates cannot offer consumers the service they expect. If a consumer’s pirate service is not delivering on quality and/or content libraries become reduced, they will likely turn to more legitimate avenues for entertainment.  This is where service providers have an opportunity to tempt consumers back with trial periods and exclusive high-quality and premium content that consumers value.

[Editor's note: This is a contributed article from NAGRA. Streaming Media accepts vendor bylines based solely on their value to our readers.]

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