Russian e-sports drive thrusts Irdeto into gaming with Denuvo buy

The year has barely begun but the e-sports industry is staking a claim as a serious trend to watch throughout 2018, with several companies already attracting acquisitions by major media players in January. Pay TV security specialist Irdeto is the latest to enter the space, buying Austrian gaming security firm Denuvo for an undisclosed fee.

Irdeto joins one of its customers, Russian mobile operator MTS, which acquired Gambit ESports last week, and more recently, buying ESforce for an estimated $100 million. Interestingly, Irdeto has highlighted Russia as a region notorious for piracy where the company is focused on winning deployments, suggesting the purchase of Denuvo has been made with the Russian market in mind.

This would create a rather unusual situation in which three e-sports acquisitions in the space of two weeks are all focused on a single market – a market where e-sports is certainly growing in popularity, but where content is at its most vulnerable. Of course, a customer diversifying its business opens the door for a rival security firm, with expertise in a specific field, to swoop in – so Irdeto had to react quickly by buying into the gaming market.

Denuvo is bringing its anti-piracy and application protection portfolio to the table, including anti-tamper, anti-cheating and optical media protection products.

Anti-tamper software aims to prevent content pirates from debugging, reverse engineering or altering an application, by hardening conventional systems to the maximum extent based on the binary codes Codefusion Engine and DeepBinding. Anti-tamper works in harmony with DRM systems, which bind a game to a legitimate user account, to stop the debugging of the DRM. It also prevents interference during multiplayer games from hackers attempting to distort code or dodge in-game pay walls to gain an unfair advantage over other gamers, by protecting executables from taking secrets of an application in live-mode and providing a runtime application self-protection (RASP).

Traditionally, the gaming industry made the bulk of its money from one-off sales, while today there is a huge market for in-game micro transactions, growing with the launch of every new app. Protecting micro-transaction revenue streams is a relatively new challenge for the gaming security specialists and changing rapidly with the advent of new payment methods.

Denuvo’s security technology works across platforms including desktop, mobile, consoles, VR headsets and even IoT applications. Denuvo has supplied security technology for popular games titles Star Wars Battlefront II and Football Manager, while its customer base includes Electronic Arts, Ubisoft, Warner Brothers and Lionsgate Entertainment.

Denuvo’s optical media protection is tasked with the more conventional hardware approach, by providing disk copy protection technology based on advanced code encryption with an application license management system. This contains algorithms ensuring only legally purchased DVDs, Blu-rays or UHD disks can be used. Optical media protection is therefore more aligned with Irdeto’s existing business – centered around protecting rights holders from losing out on sales to content pirates.

A report published by Irdeto last year created a concerning image of how Russian people perceive content, shortly after it won the account at MTS. A survey found that 87% of Russians do not believe sharing or producing pirated content is illegal, spearheaded by live sports – finding that 25.2% of respondents watch pirated baseball content followed by soccer at 23.3%.

The survey results also showed that an additional 66% of Russians believe that streaming or watching pirated content is not illegal. Given how long it took to make a dent in piracy in the Western Economy, it will take at least a decade before the bulk of the Russian population is clued up on content piracy. Then, because most of the content is not made in Russia, they may not care. It took China to become a rising player in movie production before it took an interest in policing its piracy laws.

Almost one year on, has the piracy problem in Russia made positive progress? It’s doubtful, but the more operators are concerned by the thought of losing money to pirates, particularly as they embark on new business ventures likes e-sports and UHD, the more business will come Irdeto’s way.

MTS acquiring the owner of Gambit, Praliss Enterprises, has clearly triggered Irdeto to make a gambit of its own by entering the gaming space via Denuvo, one that could pay off immediately as the Dutch firm has proven its worth by winning a conditional access contract at the Russian operator.

MTS plans to develop new products for gamers in the growing field of professional online gaming through a combined marketing initiative. Gambit Esports comprises a 16-person team of gamers competing in online tournaments, winning multiple major world and European titles.

“The success of any game title is dependent upon the ability of the title to operate as the publisher intended. As a result, protection of both the game itself and the gaming experience for end users is critical. Our partnership brings together decades of security expertise under one roof to better address new and evolving security threats. We will collaborate as a team on a number of initiatives to improve our core technology and services to better serve our customers,” said Irdeto CEO Doug Lowther.

In unrelated Russian news, the pay TV market grew to 42.1 million subscribers at the end of 2017, with pay TV operators in Russia adding 250,000 subscribers in the last quarter to total 930,000 additions for the year, according to Telecom Daily. ARPU jumped 10%, however, the report states the Russian pay TV market has stagnated, with 2017 dropping below 1 million new subscribers for the first time in several years.

Tricolor TV is the top pay TV operator in the country with 12.3 million subscribers, followed by Rostelecom with 9.8 million, Orion with 3 million and MTS with 2.8 million.