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Video Piracy: The Simple Solution to a $6 Billion Global Problem

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Share your Netflix password? Maybe loan a friend your HBO password for the weekend? Aye, bucko, it’s a pirate’s life for you.

But, while media companies could be losing revenue—as much as $500 million annually, one study estimates—from the “friendliness” of subscribers, password sharing isn’t a major worry, even though a Consumer Reports survey found nearly half of Americans admit to it.

Netflix CEO Reed Hastings has publicly played it down and HBO chief Richard Plepler—whose studio’s biggest hit, Game of Thrones, also happens to be the most pirated title ever—has said he’s more worried about a positive user experience than a shared password, joking that he hopes pirated copies are at least good-quality pirated copies.

For those services, a shared password may, in fact, simply be an extended trial for a future subscriber, giving them access to the service with the logical conclusion that—if they like it enough—they’ll arrange their own subscription.

Piracy goes far beyond password sharing

But video piracy has a far darker side and a significantly higher cost than that created by simply sharing a subscription with a friend or two, or even three or four.

Back in 2012, a White House estimate put the cost of piracy at $58 billion for the U.S. film industry alone. And, although that number has been largely debunked—it actually included the cost of all IP piracy—a more widely acceptable (and reasonable) number was put forward by the industry group MPAA. That research—which has been widely quoted (although still debated as being too high)—said the revenue U.S. studios annually lose to global piracy is roughly $6.1 billion.

An Arxan study in 2015, meanwhile, counted more than 1 million pieces of premium video content being made available on pirate sites, and warned that video piracy was a growing problem. Torrent Freak, meanwhile, in an oft-quoted story, reported in 2014 that the season’s finale of Game of Thrones was downloaded more than 1.5 million times just after it aired on HBO (and, yes, it happened again with 2015’s season ender).

SVOD services like Netflix also have had to contend with users employing VPNs and proxies to get access to geo-blocked content and even different iterations of the services themselves. Netflix famously had an estimated 200,000 customers in Australia before it even launched down under, thanks to VPNs giving Australians access to the U.S. service.

Canadians, too, unhappy that the initial deployment of Netflix in their country offered far less content than the U.S. version, routinely used VPNs to access the American version, potentially costing studios revenues from other local services.

For content owners, it’s an ongoing battle

The value of premium content is high enough that it has attracted the attention of everything from casual thieves with an HD smartphone in theaters and at sporting events to tech-savvy DVD cloning operations and organized crime. Security firms have been working with content owners for years on a problem they say continues to evolve, along with—and sometimes ahead of—the content industry.

Techniques such as digital rights management (DRM) and forensic watermarking, where a unique invisible mark is embedded into content, can help firms trace breakdowns in security.

That helps, at the very least, reduce the amount of revenue lost. But it’s not always enough, and the sheer number of pirates makes a win just a drop in the bucket.

Is there an easier solution to eradicating piracy? It’s hard to pin down an exact number when you’re talking about lost revenue from piracy. But, there’s been an ongoing belief that costs of piracy can be minimized more simply. It’s an argument based on the belief that consumers will pay for premium content if it’s easily accessible and made available at a price that fulfills their value proposition.

Video piracy rates in Australia—which has been a bastion of content pirates—have declined since Netflix launched there in March, with consumers acknowledging they’re less likely to pirate now that they have a legal alternative. Australia’s IP Awareness Foundation reported in October that the number of self-confessed video pirates (both casual and persistent) among 18- to 64-year-olds dropped to 25 percent post-Netflix from 29 percent.

It helps that several other legal OTT services have made more content available there than ever before, and that Australia instituted anti-piracy legislation in June.

Regardless, Netflix’s Hastings, during his CES announcement that the company had launched in 130 new countries, said he believed that kind of decline would be felt worldwide as content continued to come over the top.

"We think giving people what they want in a timely manner at a reasonable price is great for the movie industry, because it removes one of the key reasons people turn to piracy," Hastings said.

The Netflix Effect may be a panacea whose time has come.

[Jim O’Neill is the principal analyst at Ooyala and editor of the award-winning industry blog Videomind. StreamingMedia.com accepts vendor-contributed articles like this one based solely on their value to our readers.]

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