Report: Pirate Subscription IPTV Is a Billion-Dollar Illegal Business

A report by Digital Citizens Alliance and NAGRA released on Thursday reveals the serious and increasing harms that pirate subscription Internet Protocol TV (PS IPTV) imposes on content creators, programming distributors, and consumers.

"Money for Nothing: The Billion-Dollar Pirate Subscription IPTV Business" details the consequential scope of these increasingly sophisticated criminal operations, which combine stolen video content, readily available streaming technology, and enabling capabilities provided by legitimate businesses (such as credit card processors and hosting services) to create highly polished consumer offerings.

The report finds that approximately 9 million U.S. consumers subscribe to PS IPTV, typically for only $10-15 per month. Because none of that revenue, totaling at least $1 billion per year, makes its way back to content creators, the profit margins are astounding: between 56 (for the 3,500+ retail services in operation) and 85 percent (for wholesalers). Money for nothing, indeed.

These illegal services obviously steal from both programmers and legitimate distributors. They also harm consumers, both directly and indirectly.

• Directly, by involving them, perhaps unwittingly, in criminal conduct; revealing their personal information to unsavory actors; exposing their devices to malware; and potentially sharing their Internet connections with unknown third parties.
• Indirectly, by reducing incentives for the creation of (uncompensated) new content and raising prices for legal offerings.

As this report clearly illustrates, pirated video content today is big business with serious ramifications. Policymakers should open their eyes to the scope of this problem and take steps to discourage this criminal conduct through updated penalties and enforcement mechanisms that reflect the billion-dollar stakes involved.

TAG Initiative Reduced Advertising Revenue from Piracy

The Trustworthy Accountability Group (TAG), an advertising industry initiative with the goal of diminishing the number of advertisements that appear on websites which facilitate access to illegal content or counterfeit goods, released a new study called "Measuring Digital Advertising Revenue to Infringing Sites." 

Here are some of the key findings from the study:

• Digital ad revenue linked to infringing content was estimated at $111 million last year, of which 83% came from non-premium advertisers.

• If the industry had not taken aggressive steps to reduce piracy, those pirate site operators would have potentially earned an additional $102-$177 million in advertising revenue, depending on the breakdown of premium and non-premium advertisers.

• Ongoing industry efforts against piracy have therefore reduced the advertising revenue of pirate sites by 48% to 61%.

It is necessary to address, and diminish, piracy and content theft through voluntary initiatives like TAG to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works – thereby incentivizing more innovation, investment, and economic growth.

Another TAG Effort to Combat Online Piracy

On June 9, 2016, the Trustworthy Accountability Group (TAG) announced that advertising agencies Interpublic and Omnicom as well as Google, Go Daddy, and Bayer Consumer Health have joined its voluntary initiative that is aimed at preventing ad placement on websites which facilitate the distribution of pirated content and/or the illegal dissemination of counterfeit goods. (See this February 2015 blog for more on TAG.)

The addition of these companies and advertising agencies to TAG’s ongoing initiative should be helpful in reducing the $2.4 billion that legitimate content creators and entrepreneurs lose to pirated websites each year. In 2014, ad-supported piracy generated $204 million in aggregate revenue according the Digital Citizen’s Alliance. Without the use of Google’s search engine facilitating as much distribution of illegal content, piracy loss should be meaningfully reduced. Google’s support, if implemented properly, should mean YouTube users will not be able to generate ad-supported revenue from pirated content.

It is necessary to address, and diminish, piracy and content theft through voluntary initiatives like TAG's that help ensure that content creators, artists, innovators, and marketers can earn a return on their creative works!

Pirates May Have Killed "Hannibal"

On March 14, 2016, Martha De Laurentiis, the Executive Producer of the former NBC show “Hannibal,” published an article in The Hill asking the question, “Did pirates kill ‘Hannibal’?” “Hannibal” was the fifth-most illegally downloaded show in 2013 and nearly one-third of the show’s audience came from pirated websites — despite the fact that a legitimate download for each episode was available the following day. NBC cancelled the show in 2015 after three seasons.

Ms. De Laurentiis debunks the unfortunate but common perception that producers are not harmed by for-profit theft of films and television programs. More importantly, she says that the thousands of crew members that work on television and film sets are often the forgotten victims of piracy. According to Ms. De Laurentiis, pirates of “Hannibal” might not be concerned with the wallets of top-billed actors and producers, but they should be able to relate to the hard-working crew members who were harmed when NBC decided not to renew “Hannibal” for a fourth season.

Ms. De Laurentiis concedes that it is hard to know if pirates killed “Hannibal.” But she is sure that the more than 2 million viewers who watched the show illegally at least partly contributed to the show’s cancellation.

Isn’t it ironic that “Hannibal,” a show about a cannibalistic serial killing psychiatrist, may have been killed by its own fans who downloaded the show illegally?

As I stated in an August 2015 blog, Ms. De Laurentiis has urged that profit should be removed from piracy. As a CreativeFuture Leadership Committee member, she often speaks out about how piracy undermines the vitality of the entire creative industry. CreativeFuture, a coalition of more than 400 companies and organizations in the creative industries, notifies and warns major companies about avoiding ad placement on websites which facilitate illegal content. Ms. De Laurentiis stressed back in August 2015 that “[w]ithout their ad dollars, we can take the profit out of piracy.”

Diminishing ad-supported piracy is important to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works – thereby incentivizing more innovation, investment, and economic growth. 

Piracy and Malware Are Closely Related Problems

On December 3, 2015, I posted a blog about a new Interactive Advertising Bureau (IAB) study, which found that advertising fraud, piracy websites, and “malvertising” costs the U.S. digital marketing, advertising, and media industry $8.2 billion annually in potential revenue. The study also specifically found that illegal content costs advertising companies and digital marketing firms $2.4 billion annually in potential revenue.

This week, on December 8, the Trustworthy Accountability Group (TAG) announced a list of major advertisers who have pledged to require their advertising partners to take aggressive steps to help fight the $2.4 billion annual loss. Some of the big names include Allstate, American Express, Comcast, and Walmart. (See my February 2015 blog on TAG’s Brand Integrity Program Against Piracy.)

Also, on December 9, the Digital Citizens Alliance (DCA) released a new report entitled “Digital Bait.” The report found that one out of every three piracy websites contains malware. Additionally, consumers are 28 times more likely to receive malware from a website with illegal content than from a website with licensed content providers. The report also found that 45 percent of malware is delivered by “drive-by downloads,” which invisibly download malware onto a user’s computer without the user clicking on anything. Lastly, the report found that advertising revenue and sales of user information on piracy websites amounted to $70 million in revenue in 2015.

If it was not already clear, the IAB and DCA reports show that advertising fraud, piracy, and malware-related advertising are serious problems costing companies billions of dollars in potential revenue. However, it is encouraging to see voluntary initiatives from TAG and major advertisers that stand up against websites which facilitate illegal content.

It is necessary to diminish ad-supported piracy and advertising fraud to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works – thereby incentivizing more innovation, investment, and economic growth. 

IAB Study: Digital Fraud and Piracy Costs $8.2 Billion Annually

On December 1, 2015, the Interactive Advertising Bureau (IAB) released a new study entitled “What Is an Untrustworthy Supply Chain Costing the U.S. Digital Advertising Industry?” The study found that advertising fraud, piracy websites, and “malvertising” are costing the U.S. digital marketing, advertising, and media industry $8.2 billion annually.

Of the $8.2 billion annually, the losses are split into three categories:

• Advertisers lose $4.4 billion from invalid traffic, which induces systems to generate ad-related actions for purposes other than support of the delivery of the right ad at the right time to the right user.

• Infringed content represents a $2.4 billion loss for the digital marketing and media industry. Two billion dollars is lost revenue to content providers and $456 million is lost revenue to potential advertisers.

• The remaining $1.4 billion in losses come from “malvertising” (or malicious advertising) and the cost of fighting all these illegal activities. The $1.4 billion includes lost revenue from malware-related ad blocking ($781 million), lost revenue from search engine blacklisting when a website is impacted by malware ($57 million), and the cost of investigating illegal activities and documenting direct incidents ($423 million).

It is necessary to diminish ad-supported piracy and advertising fraud to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works – thereby incentivizing more innovation, investment, and economic growth.

GroupM Will Require Partners to Become TAG-Certified

Today, WPP’s GroupM, the leading global media investment management company, announced that it will require all of its media partners to receive anti-piracy certification from the Trustworthy Accountability Group (TAG) by Q1 2016. TAG is a voluntary initiative which helps prevent ad placement on websites which facilitate the distribution of pirated content and/or the illegal dissemination of counterfeit goods. (Read more about TAG in this blog.)

Certification entails that TAG has approved an advertising agency’s ability to identify at risk websites, prevent advertisements on such websites, disrupt fraudulent or deceptive transactions, and eliminate payments to such websites that facilitate access to illegal content and/or counterfeit goods. John Montgomery, Chairman of GroupM Connect in North America and Co-Chair of TAG Anti-piracy Working Group made the following statement in a press release:

We’re in the business of giving the world’s most valuable brands marketing advantage with smart media strategies. This inherently means we’re vigilant for clients’ brand safety. Our work with TAG in the development and now full adoption of anti-piracy guidelines is a major leap forward. With IAB, 4As, and ANA, we’ve worked years to make the digital ecoSystem more trustworthy. Fighting pirates of copyrighted content required every ounce of our tenacity and ingenuity, but with the advent of TAG’s Brand Integrity Program Against Piracy, we have powerful new tools and safeguards.

TAG and other voluntary initiatives, such as WheretoWatch.com, Rightscorp, and CreativeFuture, have emerged to aid consumers in finding legal content and raising awareness about websites, enterprises, and advertisers that violate intellectual property rights.

Diminishing ad-supported piracy is important to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works - incentivizing more innovation, investment, and economic growth. 

FSF scholars applaud the work of TAG and support this decision by GroupM!

Executive Producer of "Hannibal" Wants Profit Out of Piracy

On August 12th, Martha De Laurentiis, Executive Producer of the television show “Hannibal,” wrote an op-ed in Ad Age entitled “Marketers: Stop Advertising on Pirate Sites.” In it, she speaks out against ad-supported piracy and tells a story about how online piracy directly affects her job:

My own show, "Hannibal," was the fifth most-stolen TV show during its first season on the air, despite being available for legal digital streaming the very next day. While I appreciate the enthusiasm of our fans, as executive producer I am responsible for all production costs for the show. Piracy directly affects my bottom line, including the wages for hundreds of cast and crewmembers.

Ms. De Laurentiis is a proud member of the Leadership Committee of CreativeFuture, a coalition of more than 400 companies and organizations in the creative industries. CreativeFuture recently launched a letter-writing campaign directed at major companies whose ads routinely appear on websites which facilitate access to illegal content. In her op-ed, Ms. De Laurentiis said “most advertisers are unaware that their ads appear on pirate sites,” so simply warning them is a good first step. And because many of these global brands have reputations to protect, CreativeFuture’s efforts will help remove advertising revenue from pirate websites. Ms. De Laurentiis declared that “[w]ithout their ad dollars, we can take the profit out of piracy.”

In a May 2015 blog entitled “Ad-Supported Piracy Remains a Serious Problem,” Free State Foundation President Randolph May cited a Digital Citizens Alliance report which found that a sample of 589 pirate websites generated an estimated $209 million in aggregate annual revenue from advertising in 2014. But while the problem is still large, Mr. May is optimistic because there was an $18 million decrease in illegal aggregate ad revenue from 2013 to 2014. This decrease may be attributable to several voluntary initiatives which help to fight online piracy and intellectual property infringements. Brand Integrity Program Against Piracy, WheretoWatch.com, Rightscorp, and now CreativeFuture have emerged to aid consumers in finding legal content and in raising awareness about websites, enterprises, and advertisers that violate intellectual property rights.

Diminishing ad-supported piracy is important to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works - incentivizing more innovation, investment, and economic growth.