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5 December 2019

Streaming piracy falls in EU but not for live sports

Live sports has become the hot spot for streaming piracy amid a slight fall in infringements around other forms of content. This conclusion can be drawn for Europe at least from a compendium of recent studies coupled with analysis conducted by our research arm Rethink TV for the report Globalization lifts TV sports rights past $85 billion future Sports Rights Forecast to 2024. One common theme running through much of the research is that the impact of piracy can be reduced by making the associated content readily available affordably and conveniently at high quality, while catering for trends in viewing behavior.

This is particularly relevant for “near-live” sports content which has witnessed a surge in piracy recently driven by rising demand for consumption of sports highlights just after an event, instead of watching the whole of it live. Whether this reflects falling attention spans, busier lives or increased consumption on smaller devices more conducive to snacking, there has been a rapid rise in viewing of highlight packages both from legitimate and illegitimate sources. Where authorized rights holders fail to provide adequate highlights and analysis sufficiently quickly after the event, a gap is left for pirates to fill, which they have been doing by providing illegally streamed content and user-posted highlights on social media. On these channels, audiences are being shown and appear willing to accept advertising for various illicit services, which monetize the operation.

The positive aspect of this phenomenon is that rights holders can counter by providing better highlights and analysis packages more quickly and entice consumers away from pirated alternatives by reducing or eliminating the advertising, while providing even higher quality. This raises the more general question of how to combine anti-piracy measures most cost effectively, maximizing revenues. After all, if consumers are turning more to highlights, they may be less willing to fork out higher subs for the full package, raising the question of how rights holders should offer and price different options. If they make the highlights packages too cheap, they will lose revenue but if they are too expensive, pirates will step in.

In order to answer these questions, rights holders and operators need accurate and comprehensive information about the nature, extent and conduct of streaming piracy and on these fronts two recent related reports from the EU (European Union) are welcome by drilling down into motives, business models, ecosystems and differences between countries. Data on stream piracy has been anecdotal and elusive so far but these two reports have succeeded in giving a more detailed picture of where piracy is occurring, which models are more prevalent and what counter measures are most effective, for Europe anyway. Both reports allude to streaming as IPTV, which means IP transmission rather than managed services over broadband networks as commonly understood by the acronym.

The first study, Illegal IPTV in the European Union, carried out by the University of Bournemouth in the UK, analyzes the complexities of illegal streaming business models, the technologies used, the scale of piracy services and the associated revenue losses throughout the 28 EU Member States. Quantitative estimation was performed using official data sources, incorporating household survey data when possible from Eurostat, the EU’s provider of statistical information.

These insights were enhanced and adjusted by feedback from sports bodies such as the EPL (English Premier League), cybersecurity firms like Kudelski, law enforcement agencies including the Spanish Police, judicial bodies such as Eurojust, and BT representing operators.

This report identified the three business models of streaming piracy as illegal subscription, wholesaling and link aggregation portals to websites enabling access to unauthorized streams. The first two of these often go hand in hand since streams ultimately accessed by consumers may first be transmitted wholesale to a reseller at a lower price, just as can happen for legitimate content.

Of these three models, the first of illegal subscription is most common, where services are accessed via a dedicated website with the main revenue being direct payments. This model can also generate revenues indirectly through spread of malware. Indeed, the report has identified cases where pirating hardware such as the infamous technically legal ‘Kodi’ set tops come loaded with malicious malware enabling pirates to access router settings and in turn infect network devices to steal user credentials.

The report is less helpful in assessing penetration of such devices because it is hard to separate legitimate form illicit uses given they are available legally. It relies on rather old third-party sources, such as an Industry Trust survey revealing a 143% growth in associated Google searches in the UK during 2016. That is an astonishing rate of growth but occurred three years ago and so is largely irrelevant now.

The report does provide some insight into the third business model, link aggregation, which has been most prevalent for live sports streaming but whose impact has been muted by relatively poor streaming quality. It has though gained some traction because of the ease of access, with revenue generated again either through spreading malware or in this case collecting pay-per-view and pay-per-click payments from advertising fraud. This is where such sites lure ads from legitimate brands, often exploiting programmatic systems. Various counter measures have been successful, but the report does not mention them, perhaps because they arose first in the US through the Joint Industry Committee for Web Standards, which claimed to have reduced the number of ad impressions on pirate websites by 90% in two years and eliminated ads from premium brands completely.

However, inspired by that success, the Trustworthy Accountability Group (TAG) in February 2019 launched a Europe-wide anti-piracy program designed to block ads from piracy websites in a similar way. Called ‘Project Brand Integrity’, the initiative is run by advertising insurance provider White Bullet. At the same time TAG joined forces with the Joint Industry Committee for Web Standards as its US counterpart to develop a common anti-ad fraud standard.

That first EU report dissected the piracy ecosystem, whose structure is in any case quite well known because it is essentially the same infrastructure as used for legitimate services. What was more valuable was the report’s cataloguing of the different players or “actors” involved, whose participation is essential to make piracy work. These include consumers, resellers, facilitators, distributors, search engines, social media platforms, online marketplaces, app stores, CDNs, aggregators and ISPs. Here facilitators are the parties that provide guidance, blogs and social media sites, showing how to configure end user systems to access AV streams illegally. This may extend to full online customer support sometimes superior to that offered by legal service providers.

The point is that some of these actors are malign, such as facilitators, while others are willing accomplices, like consumers, while yet others may be relatively unwitting participants in the chain, like social media sites and ISPs. Clearly counter measures must aim to block the pirates and discourage consumers while combining coercion and incentives to persuade the enabling parties to combat piracy more aggressively within their domains.

This cues nicely to the second report, Online Copyright Infringement in the EU, which analyzes trends in piracy and factors determining differences in levels between member states. This scoured existing literature and the available data sources to identify factors that influence consumption of pirated content, broken down by country. These factors include variables in four categories, socio-economic, demographic, market-related and cultural.

Under the first heading come income, education, inequality and unemployment, while demographic variables include proportion of young people in the population.

Variables related to the marketplace include market size, as well as quality of internet infrastructure and the number of legal offers for the various types of content. Then under the cultural heading come attitudes towards intellectual property (IP) infringement.

Of the socio-economic factors, level of income per capita and the extent of inequality were found to have the greatest impact on consumption of pirated content. High income not surprisingly dampens piracy while inequality amplifies it because those earning less are more acutely aware of the content their wealthier neighbors are consuming but which they cannot afford legitimately.

Market size also matters, with piracy higher in smaller countries where there are fewer internet users, this measure perhaps being a surrogate for content availability and affordability. Again not surprisingly, countries where more people accept digital piracy and do not regard it as ethically reprehensible exhibit higher levels of piracy per capita.

For other variables, the results were more ambiguous, including interestingly availability and awareness of legal offers, which has long been assumed to reduce piracy. However, the survey results indicate that while availability of legal sources appears to reduce consumption of pirated film, it actually increases access to pirated TV content.

The study concludes that further study is needed on this count, but it looks likely that consumption of TV pirated content is perhaps more causal and spontaneous around live sports in particular, where awareness of legal options only advertises the potential for seeking illicit sources. It may also be that the high price of legal options for premium sports encourages piracy, which comes back to that question of how to differentiate between different offerings to optimize revenues against piracy.

Finally, that second study pointed the finger at member states where piracy was most rampant, Netherlands and Sweden coming top of the league with 8.9% and 8.5% of the population respectively estimated to access unauthorized streams. Romania and Bulgaria exhibited the lowest levels with only 0.7% and 1.3% of the population estimated to stream IPTV from illicit online sources.

These distinctions reflect differences in quality and availability of broadband infrastructure more than levels of honesty or integrity. The more extensive the infrastructure, the higher the levels of piracy per capita. Overall, 3.6% of the EU population, or 13.7 million individuals, access unauthorized content online. This generated €941.7 million ($1 billion) in untaxed revenue in 2018.

The headline of that second study was that total streaming media piracy actually declined in the EU by 15% over 2018, but was less for TV at 8% with music down by 32% and film by 19%, although those figures mask a rising tide of sports stream piracy.