Is It Worth It to Defend Your Service from Video Piracy?

by Shane Keats on October 28, 2020

The answer isn’t obvious. From headcount to vendor spend, combating video piracy is expensive. And piracy has been a part of the entertainment industry since the silent movie era. It’s not crazy to say, “Maybe it’s just a cost of doing show business.”

So let’s start with a different question.

How much money does the video industry lose each year from piracy?

$52 billion by 2022.

$67 billion by 2023.

$29.2 billion in the U.S. alone. But maybe $71 billion.

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Three analyses. Four estimates.

I asked my colleague Ian Munford, who has spent years implementing anti-piracy solutions for customers, why it’s so hard — after he finished briefing a major international rights holder.

“They knew they had a problem with people using proxies to watch blackout content, or pay the price of the cheapest territory, but they didn’t know how to measure it and they didn’t know how to think through the ROI of defense. For example, they hadn’t heard of displacement.”

What is displacement?

Viewing pirated content displaces legitimate viewing. As an economic term, think of the displacement rate as representing the number of legitimate views lost to piracy.

A displacement rate of 1.0 means that for every pirate view, 1 legitimate view is lost. A displacement rate of 0.1 means that for every 10 pirate views, 1 legitimate view is lost.

The University of Amsterdam’s Institute for Information Law surveyed nearly 35,000 people across 13 countries. When it came to watching “blockbuster movies,” they found the displacement rate to be 0.46, meaning that for every 10 pirate views, 4 to 5 legitimate views were lost. They noted that this finding was at the 99% confidence interval.

They’re not the only ones who have studied this.

Rob and Waldfogel (2006)
- Displacement Rate: 0.80 1st viewing and 0.20 2nd viewing
- Cohort Studied: University of Pennsylvania students
Ipsos and Oxford Economics (2011)
- Displacement Rate: 0.45
- Cohort Studied: 3,500 adults in Australia
Poort et al. (2018)
- Displacement Rate: 0.46 for “blockbuster” films
- Cohort Studied: Online survey of nearly 35,000 people in Europe (7,000 were minors)
Herz and Kiljański (2016)
- Displacement Rate: 0.37 1st viewing
- Cohort Studied: Online survey with almost 30,000 respondents
Bai and Waldfogel (2012)
- Displacement Rate: 0.14
- Cohort Studied: Chinese college students

Does shutting down the pirates increase legitimate viewing?

Piracy expert Brett Danaher and his colleagues analyzed the digital revenues for three major motion picture studios before and after the shutdown of Megaupload, a major “cyberlocker” site similar in some ways to its famous cousin, the Pirate Bay. When Megaupload and its associated sites were shut down, the researchers found that digital revenues for these studios increased by 6.5-8.5%. (Danaher and Smith, 2014)

Danaher later looked at the impact of the United Kingdom’s shutdown of 53 pirate sites. According to this research, the shutdown “caused a 6% increase in visits to paid legal streaming sites like Netflix and a 10% increase in videos viewed on legal ad-supported streaming sites like BBC and Channel 5.” (Danaher, Smith, and Telang, 2016)

A third study by Danaher found that once a consumer finds out how to pirate, they are less likely to make purchases in the future. That adds evidence in favor of fighting back.

So how much revenue can I recapture if I fight this?

I know you want to go to your CFO, CIO, or CISO and say, “For every $100K we spend fighting piracy, we will generate $150K in previously displaced revenue, we’d love to join that meeting and say, “for every $100K you spend with Akamai security products, we’ll generate $150K in revenue displaced by piracy.”

Alas, if only it were that simple.

What you can say to your leadership is this: Piracy is as varied as it is vast. Estimates of the percentage of people who engage in piracy are as high as 9% in the U.S. and 59% in the Middle East. One study found that 65% of Thailand residents engage in piracy. But the people who view pirated content vary, as do their motivations and what might move them to “go legit.”

We know the following, which is pretty much common sense:

Younger people engage in more piracy than older people
People with more disposable income, and from countries with a higher GDP, are less likely to pirate
The newest releases, the most popular shows, and the most expensive live events are the most likely to be pirated

Perhaps less intuitively, we also know this:

The legal consumption by people who also pirate is two times that of people who only consume legally

So what’s the answer?

Take a look at our white paper “Inside the World of Video Pirates: How Do We Stop Them?“. It lays out the piracy ecosystem clearly. It helps you think through which forms of piracy are most likely to be used against your service. It helps you evaluate the motivations of the attackers and the viewers. And it lays out a framework for a 360-degree posture that will help you take on piracy with the resources merited by your unique circumstances.