Tag: digital citizens alliance

DCA Releases New Report on Ad-Supported Piracy

The Digital Citizens Alliance, has released its second annual report on the for-profit, ad-supported media piracy trade.  In collaboration with MediaLink, the report titled Good Money Still Going Bad studied 2014 data to reevaluate the central questions posed in the research done with 2013.  How profitable are these pirate sites, and where does the money come from? The macro view is much the same as the prior year.  Piracy is still big business, and brand advertising represents the lion’s share of the revenue.  Several sites that were operating in 2013 were gone, while new sites came online.

Overall, revenue ($209 million) for the sites studied appears to be relatively flat, but there are some new trends apparent in the 2014 data, notably a shift among users from illegal download portals to illegal streaming portals.  This is significant because video ads are more valuable than banner ads and can be embedded into streams so that viewers are forced to see them.  But let’s take a step back for a moment and understand what reports like this one from DCA and MediaLink tell us about the revenue streams for pirate sites, regardless of scale of the enterprise or delivery platform.  Because for all the ersatz intellectuals who tread the boards on TEDx to talk about “sharing” and piracy as some sort of socially or ideologically progressive revolution, it’s important to remember that this black market simply would not exist without the money that is available exclusively in a bottom-feeder’s strata of trade. Revenues for these sites are generated by essentially three drivers, in the following ascending order:  malware, affiliate marketing, and advertising.

Malware

Of the 589 sites studied for this report, at least one-third contain bogus links that offer to “update players” and other options designed to fool users simply into thinking they need to go through such steps in order to watch a program they’ve selected. The site owners are paid for every click, and the bogus players and plug-ins users think they’re downloading install malware that is typically used to facilitate identity theft and other data abuses tied to profitable criminal activity.  I discuss this in more detail in this post regarding another report released by DCA in collaboration with NetNames.

Affiliate Marketing

The estimated total revenue earned by the sites studied is $209 million.  Of that total, I am told by Mark Berns of MediaLink that roughly $60 million is generated via links to affiliate marketing. Affiliate Marketing is a generic term for advertising that links directly to services and products in which an actual transaction takes place between consumer and some third party with something to sell. Not everything sold via affiliate marketing is a scam, but it is a great platform for all manner of scams, from get-rich-quick promises to bogus “dating” services to nine zillion secrets to six-pack abs.  So, if a user ends up buying Guru Gus’s Great Guide to Getting Gorgeous Girls, Gus is happy to pay the pirate site owner who attracts that sucker with ads that provide click-through to his e-commerce site.  And of course on many pirate sites, some of the ads are even more unsavory with possible ties to sex tourism that may be directly linked to human trafficking.

Brand Advertising

Such unappealing associations, along with the exploitative nature of piracy itself, have led the major advertising community to begin looking for ways to extricate their brands from  the piracy business.  The $149 million in advertising revenue indicated by the report represents media budget dollars that we might say fall through the cracks of the online media buying system. As explained in other posts, the major brand advertisers do not intentionally seek to place their ads on these sites; the ads wind up there as remnants via secondary or tertiary media placement companies. And while no advertiser likes waste, the truth is that $149 million spread across the media budgets of even just a few hundred major brands does not represent massive waste in hard dollars relative to other forms of waste in traditional advertising.   But, as the report points out, “Legitimate brands take a double hit when their ads appear on content theft sites. Their reputations suffer by association with content theft itself and with the illicit services whose ads also appear on the sites. In addition, they are being defrauded. The money they spent to advertise on legitimate sites is instead fueling content theft, and the impression counts are being boosted by bots and other fraudulent means.”

GoodMoney_Infographic3a

Regardless of any attempt to measure exactly how many dollars are wasted, what both advertisers and advertising professionals have begun to take most seriously, is the damage done to brand value (which represents billions in investment) when their brands are associated with sites that are both criminal in function and sleazy in nature.  Tiffany doesn’t want to be associated with Guru Gus’s Guide just like Bank of America clearly doesn’t want to be associated with a site that feeds people malware that can result in identity theft.  And in an effort announced this past February, major advertising organizations launched a new program designed to create a kind of Good Housekeeping Seal of Approval (in this case Digital Advertising Assurance Providers or DAAPs) to give advertisers insight they can use to protect the integrity of their brands.

The 2014 data in this report reveals a slight drop ($18 million) in total revenue overall since the study of 2013 data, but that is not an indication that the profitability of piracy is trending downward. For one thing, the dynamic ecosystem in which sites continuously disappear and reappear means that the revenues will vary depending on when the data are collected. Moreover, the aforementioned rise in illegal streaming is the one category that appears to be growing. As stated in the report:  “Video Streaming Host Sites segment was the only one in which revenue grew from 2013 to 2014, fueled by higher video CPMs and a 40% increase in the number of sites. Average site revenue more than doubled for sites in the segment, and aggregate revenue was up 68.2% to $46.2 million.” Illegal streaming poses a significant threat to both the media producing and the advertising communities, particularly as it offers a much easier user experience than Bit-Torrent or cyberlocker portals. In all likelihood, this report reveals the start of growth in the illegal streaming market rather than a plateau.

Ultimately, reports like this are most meaningful to major advertisers whose coffers very clearly, however unintentionally, provide 75% of the revenue that supports these exploitative sites.  It’s time for that to change.  Having been around advertising people my whole life, I believe the brand managers and ad professionals are predisposed to want to make that change, and I hope good-faith efforts continue in that regard.  And just think, if the advertisers are able to starve content thieves of enough revenue, a really cool byproduct might be that we don’t have to listen to any more idiots on TEDx tell us how piracy is all about freedom.

Talking Cyberlockers with Dr. David Price (Podcast)

This time last year, I had the opportunity to talk to Dr. David Price of London-based NetNames shortly after they released a report on the scale and scope of media piracy worldwide.  Presently, Dr. Price is in Washington DC where, along with collaborator Tom Galvin of the Digital Citizens Alliance, he officially released a new report on piracy, this one focused entirely on sites known as cyberlockers.  Titled “Behind the Cyberlocker Door,”  the report focuses on the top thirty sites that use this technology to facilitate and profit from the illegal distribution of copyrighted content like motion pictures, music, books, and video games.  The report describes how these black-market businesses function, and how they earn their money.  And among the more striking aspects of the study is the fact that Visa and Master Card, despite claims to the contrary, are facilitating transactions for these cyberlocker sites.  Moreover, users of these sites may be surprised to learn that signing up for premium accounts to enable faster downloads could well expose them to malware designed to enable identity theft.

Guess who the real victims of piracy are…

People like to tell themselves and others that piracy of entertainment media is a victimless crime, by which they typically mean that their one little download of a major motion picture doesn’t hurt anyone when the studio that produced said picture is making millions.  I’ve assailed this fallacy in more than a few posts, but a report released today by London-based NetNames, in collaboration with the Digital Citizens Alliance, makes quite clear that if you’re a user of a pirate site, the most vulnerable victim in the transaction may well be you.

This time last year, Dr. David Price authored a report for NetNames called “Sizing the Piracy Universe,” which as the title implies, took a very broad look at the global piracy ecosystem.  This new report “Behind the Cyberlocker Door” specifically examines the mechanics and finances of the top 30 cyberlocker sites, which are designed specifically to facilitate mass theft of copyrighted material.  Fifteen of the sites were direct download sites, and fifteen were streaming sites, and all were found to be profitable enterprises deriving revenues from a combination of advertising and the sale of premium accounts, primarily process through Visa and MasterCard.

For readers who don’t know about cyberlockers, think of the system as a vastly more robust version of a legal cloud storage service like Dropbox designed to share a limited volume of files with family, friends, and business colleagues.  These cyberlockers facilitate uploading and downloading of unlimited files worldwide among complete strangers, and  the report states unsurprisingly that the majority of the content (roughly 80% not including pornography) found on these sites is comprised of illegally distributed copyrighted works — movies, music, books, and video games.  The 30 sites studied earn collective annual profit of about $69 million.

These may not be compelling statistics to the staunch piracy advocate or even the casual piracy dabbler, who wants to convince himself that these enterprises are just a reaction to outdated scarcity caused by unreasonable copyright regimes and greedy producers.  But just because Kim Dotcom, the founders of The Pirate Bay, and even Internet industry advocates like to make grandiose, ideological claims about piracy, people should not be fooled for a second that the owners of these sites are quite so high-minded as all that.  In fact, parents of kids with unfettered access to computers ought to pay particular attention because these sites can be plain dangerous.  Dr. Price’s report indicates that more than half of all cyberlocker sties are responsible for malware infections on computers.  This is particularly worrisome as more and more consumers gravitate toward mobile devices, and the threat of identity theft through malware will likely become more acute.  Mobile devices are typically less secure than home computers, and people are storing an increasing amount of personal and financial data on mobile devices through apps designed to make transactions and communications more convenient.

A typical way in which malware is introduced by a content-theft cyberlocker, one offering downloads of movies for instance, is to sell users premium accounts and/or third-party software to expedite downloads and playback of motion pictures.  Not only do these sites charge for the service — and we’ll come back to that — but the process stepping users through sign-up and/or downloading player software is designed to mask the introduction of malware to a computer that can then be used for identity theft.  The money made by advertising and selling premium accounts to infringing material is good money for these sites, but that business model is really just bait to attract users to these sites in order to exploit their data in some more substantial fashion.  So, I know it’s terrible that content producers would ever presume to charge dirty dirty money for legal access to their works, but $3.99 to rent a movie seems like a way better deal than letting some hacker in Ukraine roam around in my personal data.

One might rationally ask why someone would pay $10/month for a premium account on one of these cyberlockers but refuse to pay $8 for an account with a legal distributor like Netflix.  The answer will invariably come back that a Netflix or a Hulu, for instance, doesn’t have every film or TV show ever made whereas these sites that don’t enter into legal agreements with producers do have just about every title you can name.   I suppose for some, that rationale is enough justification for doing harm to producers as well as risking their own data security, but the premium account phenomenon does give lie to all that nonsense calling copyright a form of “artificial scarcity.”  I mean, what are the pirates doing offering slow downloads for free and fast downloads for a price other than “creating artificial scarcity” in their own black-market paradigm?

Quite simply, piracy is a business that exploits the labor of one segment of society in order to fleece another segment of society who think they’re getting away with something.  And if that other segment is you and your data gets hacked, maybe all this pseudo-progressive talk about piracy as a social good will start to sound more like the hogwash it is.