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18 July 2019

Lightbulb moment – Parks says defeat pirates by offering content free

Despite best efforts, the fight against content pirates is futile and will hemorrhage a $12.5 billion-shaped hole in the US OTT video and pay TV industries by 2024, a swelling of 38% from 2019’s lost revenues of $9.1 billion.

These figures come from Parks Associates, in a report which urges OTT video service providers to embrace advertisements and start offering content free of charge to appease the pirates. Is this the best Parks can muster as its idea of forming a defensive line against the growing threat of content piracy – just giving up the ghost and dishing out content for free? The US research firm has done a poor job of subtly allowing its vested interests to steer the report’s conclusion. Parks sounds just like another company jumping on the bandwagon of “Netflix will eventually have no choice but to pursue advertising revenues.”

Parks Associates’ 360 Deep Dive: Account Sharing and Digital Piracy report appears to have – for some bizarre reason – bundled account sharers into the same bracket as genuine content pirates which we see as a fundamental mistake. Account credential stealers, which is rife trend within the dark web, would certainly be classified as pirates, but such a widespread trend as account sharing should be analyzed and embraced by a major research outlet with an eye to how the market can react, as opposed to just shunning it altogether.

Moving on, the research has found that consumers viewing non ad-supported OTT video services for free (a.k.a. pirates in the eyes of Parks) are 22% more likely to subscribe to OTT services than the average US broadband household. Furthermore, these so called “pirates” are three times as likely to use ad-supported services and twice as likely to use transactional online video services.

This reminded us of a study from Irdeto published a year ago, highlighting how the dark web served as a buzzing marketplace of OTT video passwords – going on the cheap for an average $8.71 – while suggesting little can be done to extinguish the problem. This underscores the common trend of password sharing which Netflix famously used to its advantage, offering a $13.99 a month package for four simultaneous streams. Smaller streaming services cannot afford such a luxury as password sharing – let alone illegal password sales.

During April 2018, Irdeto identified and monitored more than 15 dark web marketplaces where OTT credentials were illegally available for purchase, primarily for Netflix, HBO, DirecTV Now and Hulu accounts. Irdeto also uncovered that bundling isn’t just a marketing strategy used by operators but also adopted by pirates, selling multiple sets of credentials for higher prices. Surely then one simple solution is that streaming service providers should regularly urge subscribers to change their passwords – or simply point them towards a tab where streaming activity can be easily viewed to identify unsolicited activity.

Additional data from Parks Associates shows that 20% of US broadband households now use some form of piracy app, website or jailbroken device. It reckons the focus of pirates has shifted towards OTT video as a result of the growth in connected device ownership – not exactly rocket science.

“Growing subscriber numbers and an increased number of services signal a very healthy OTT market, but more services and aggressively promoted content could incite more piracy over time. Consumers will hit an upper limit to spending eventually. When that happens, they will resort to pirate tactics to get the content that they want, particularly for sports and other content where trials are not available,” said Parks Senior Research Director Brett Sappington.

Going by these findings, we can see how Parks has arrived at such a brash conclusion that the only way to prevail in the war against piracy is to make everything free. Sometimes, however, you must apply a little logic to your data and perhaps that’s what lies within the heftily-priced full report which for some reason or another wasn’t articulated in the press release, but we doubt that.