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advocate or even the casual piracy dabbler, who wants to convince himself that these enterprises are just a reaction to outdated scarcity caused by unreasonable copyright regimes and greedy producers.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.

© 2014, David Newhoff. All rights reserved.

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  • Wonder how many of the things shared from these sites are images, (photography and artwork)? The pirate site model seems a lot like scraper sites, in that they often make their real money from the nefarious practices users don’t think about. The malware, identity theft, fraud, etc. Whereas pirate sites may be full of stuff that infringers put there, scrapers usually do it with software and scrape anything online, often senseless stuff, but many, many art and photo images. I’d love to see the anti piracy efforts remember that images are infringed, too, and include them in efforts to combat this. Thanks.

  • The $69 million is revenue for the site operators and in no way correlates to the amount of revenue syphoned away from Copyright Holders, which is in the hundreds of millions of lost revenue.

    Think of it like the person who breaks into your car to steal the stereo. He sells it for $20 on the street and you pay $750 to get the window replaced, the dash fixed and a new player installed.

  • Pingback: DCA Releases New Report on Ad-Supported Piracy - The Illusion of MoreThe Illusion of More

  • Who really is loosing money here I mean come on how many people are going to watch a small yv instead of going to the movies in the first place? 🙁

  • I understand that those who produce a movie or music put forth a lot of capital and they expect a reasonable return for their investment. The key word is reasonable. After a time, I believe that all media should become public domain and free to be copied for no payment. The big money doesn’t seem to feel this way and I call BS on this.

    • David Newhoff

      Hi, jaymon. I approved the second of your comments since it was substantively the same as the first and I assumed you didn’t intent to repeat yourself. A lot of people feel the way you do, but if you really look at copyright in a broader context, it’s not quite so simple as calculating that big rich company x is rich enough, so let’s set copyright terms here. The rationale for the current terms is tied to equity with trading partners. Meanwhile, it’s both difficult and (in my view) inappropriate for the law to decide when a creator has “earned enough.” It may look easy if your only data set is Hollywood blockbuster movies, but if you look at individual authors around the world, all with unique biographies and lifespans, your assumption of “reasonable” return becomes a hell of a lot harder to calculate. An author might write an important novel at 23 then be hit by a bus at age 27, and the clock begins ticking on the copyright terms; while another author may try for 30 years and not publish until she’s 50 then die of disease at 71. We can roll back terms, but it’s not all so simple. Then, there are examples–I’ve cited the Jerome Robbins Foundation in posts–where the licensing fees continue to invest in new works, and it’s hard to make a case for those copyrights ever ending because all they do is finance new artists.

      See my colleague John Degen’s article about sending a copy of Anne Frank’s Diary to a German Pirate Party member for some context on this issue:

      Additionally, despite many assumptions and some fairly weak scholarship on the matter, there really is no evidence that copyright terms are stopping anyone from creating. I only ever encounter this sentiment from people who begrudge big producers their money (and it’s fine to feel that way); but most of my friends are artists in one medium or another, and not one of them ever says, “Wow, I can’t create anything anymore because copyright has locked up all the precedent works.” No creator thinks this way, and if you understand how copyright actually works–namely the idea/expression distinction–no creator needs to think this way.

      Thanks for reading and commenting.

      • Hi David;
        Haven’t been here in awhile (busy creating content)…but I think where your premise falls apart is where you compare copyright to a patent, for example. A patent is good for 17 years, and in that time the rights holder is supposed to exploit his or her creation before the patent expires and the idea comes into public domain (witness Viagra this week). Copyright is currently at authors lifetime plus 25 years (it might be more – like i say, I haven’t been following this lately). I believe that’s just way too long. And even if you would like to use your analogy about the author being hit by a bus, I still think it’s too long.

        If you take the case of music, musical styles change with some frequency. If music falls into public domain, other people can use those compositions (without fear of lawsuit – a point to be noted) and create new works based on them. The idea of using royalties to finance other works reeks of an “art committee” who will decide what works get funded. If you want to talk about strictly original works, you’re correct. At that point copyright doesn’t enter into it. But for many, public domain is very important in terms of what they are making…photographers, just for one example, can (using new digital tools) take an existing work and twist it around to create something that one could describe as unique…except if you can tell it’s built on an underlying photo…and then you are open to a lawsuit. Which makes lawyers rich. I’ll opt out of that one…

        In my opinion, a copyright that lasts 25 or 30 years seems to be about right to me. The Disney drama over Mickey Mouse (which was trademarked anyway) really did everyone a disservice.

      • Hi, Overviper:

        I don’t believe I mention patent in that particular post, but without comparing and contrasting the two laws, I’ll stick to copyright terms. First, they’re longer than you say — Life of the author plus 70 years, or a flat 95 years for works made for hire. The current terms are largely tied to parity with trading partners, so shortening them unilaterally in the U.S. isn’t quite so easy. I’ve addressed terms in several posts, including the myth that the last extension was solely at the direction of Disney over Mickey. (Mickey can be both copyrighted and trademarked, by the way.)

        So far, I see a lot of instinctive feelings that terms are too long but have seen no sound, empirical evidence to show that terms have diminished the output of new creative works, including many that build upon precedent works in one way or another. In fact, working around copyright tends to have the benefit of generating more distinctive works rather than more homogeneity. Apropos your photographer example, the limitations on copyright continue to make what you describe quite possible regardless of terms. In fact, after the decision in Cariou v. Prince (with which I disagree), a visual artist can probably take considerable liberty with an existing work and get away with it.

        Thanks and good luck with your work!

        A few posts on these topics:

  • Company’s deserve to lose all their money if they claim there’s a victim and there isn’t one

  • It’s hard to feel bad about downloading a movie like AVENGERS or another blockbuster knowing that those movies made 3x their original budget. Especially someone like me who ends up buying the Blu-Ray when it comes out anyway. Case in point: AVENGERS INFINITY War had a budget of $316 – 400 million dollar budget. It made $2.046 BILLION. And that’s BEFORE the Blu-Ray release. So I’m supposed to feel bad for downloading it (I didn’t download it, just trying to get a point across) Especially since I bought the Blu-Ray the day it came out? If a movie ticket cost $10 plus at least $10 for concessions, the studio made their $10 plus the extra $10 for the blu-ray. In total, per person, they made $30. $10 for the ticket and $20 for the blu-ray. So no. I wouldn’t feel bad for downloading that movie.

    • Okay. Well, thanks for your thoughts, Jason, but nobody actually cares whether you would feel bad about downloading Avengers movies. Yeah, they make a lot of money. So what? I pay the owner their 4-5 bucks to rent the film rather than support pirate sites that a) don’t deserve any of the money they earn; and b) harm much smaller filmmakers and other artists much more acutely. The grocery chain where I shop is owned by a Belgian Conglomerate that makes like $13 billion/year, yet I would not choose to pay some thief to go in there and steal groceries for me, even if it were as easy as a mouse-click. Taking something and enriching a criminal enterprise is a binary choice; it’s not relative to the revenue generated in the legit market by the particular product being taken. Your “point” has be repeated millions of times on this subject, but it’s still flawed logic.

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