Report pulls video piracy from the shadows

FBI Video Piracy Warning

Twenty-nine billion is a very big number and, when it’s US dollars as opposed to, say, beans, for instance, it’s enormous. But that’s the enormous number a new study says video piracy costs the US economy alone. $29.2 billion in 2017, to be exact.

I’m tempted to breakout, here, what you could buy for that much money, as in you could buy 29,200,000,000 Titleist X-Out golf balls (and pay the tax, too, depending on where you live). But, why bother? I lose enough $4 Titleist Pro V1s in a round to keep you in golf balls for an entire season. You just gotta find them, because I never can.

But, that really reduces the gravitas of this report, Impacts of Digital Piracy on the U.S. Economy, which was paid for by the US Chamber of Commerce, the Chamber’s Global Innovation Policy Center and NERA Economic Consulting. And, seriously, video piracy is a significant problem in our industry. One that, apparently, despite the best enforcement efforts and technology of the industry, is rampant.

Video piracy evolving

Consider: In a well-known, often-cited study from industry trade group the Motion Picture Association (MPA), The Cost of Movie Piracy, US studios were estimated to have lost $6.1 billion in 2005 to video piracy worldwide. Almost two-thirds (62%) of that was pirated DVDs. About 38% was via the Internet. The report estimated the global industry overall lost $18.2 billion in 2005, just 62% of US losses.

Those MPA numbers, though, consider just movies, not the broader construct of the new report that includes TV shows.

And the Internet? Well, the Impacts of Digital Piracy report posits that today, 80% of video piracy is attributable to streaming; that’s about $23.4 billion. For the US alone. (A 2017 report from Digital TV Research, meanwhile, forecast the cost of piracy to the global TV and film industry would hit $51.6 billion by 2022, up from an estimated $31.8 billion in 2016. It said the cost to the US industry in 2022 would be $11.6 billion.)

As the new report says, “as legal streaming access has proliferated, so has digital piracy.”

The report estimates US movie and television production and the distribution industry generated 2017 annual revenues of $229 billion, directly supporting 927,000 jobs.

The critical numbers:

  • 26.6 billion: Pirated views of U.S.-produced movies in 2017
  • 126.7 billion: Pirated views of U.S.-produced TV episodes in 2017
  • $29.2 billion to $71 billion: Cost of video piracy to the US economy in 2017
  • 230,000-560,000: Number of US job losses because of video piracy
  • 97%: The share of video piracy of US content committed by non-US residents
  • 80%: The amount of piracy attributed to streaming

Password sharing and video piracy

The industry is wont to equate password sharing with video piracy, pointing to how widespread it is and the obvious cost in lost revenue to streamers.

But it’s really another issue altogether, one that some studies dismiss as relatively minor since the bulk of password sharing – according to a survey – occurs within family units.

Netflix CEO Reed Hastings said in 2017, sharing subscriptions isn’t always a bad thing: “We love people sharing Netflix – that’s a positive thing, not a negative thing.” So, it’s possible to grudgingly dismiss sharing passwords to streaming sites as a form of marketing.

But not so video piracy.

Speaking of piracy related to Game of Thrones, HBO’s long-time cash cow and one of the most pirated shows ever, HBO exec Michael Lombardo said in 2013: “(Piracy) is a compliment of sorts. It’s something that comes along with having a wildly successful show on a subscription network.” At the time, 12.5 million people watched the series legally.

By Q3 of that year, Netflix reached 31.1 million domestic subscribers, passing HBO in customer numbers. HBO began taking video piracy more seriously, issuing takedown notices to pirates overseas and even to bars in the US that hosted relatively insignificant GoT viewing parties.

The bottom line

The industry, overall, has worked hard to minimize the impact of piracy. From digital rights management to digital video – and audio – watermarking, monitoring and aggressive legal enforcement against pirates, content owners and distributors have adopted a multi-prong approach that has actually reduced piracy growth rates significantly.

As Digital TV Research Analyst Simon Murray noted in his piracy: “Legitimate revenues from OTT TV episodes and movies overtook online piracy losses as far back as 2013. The gap between the two measures is widening.”

While technology has played a major role in helping to stem that tide, if you can call $29.2 billion in losses to video piracy “stemmed.” But, the most logical and cost-effective approach to battling video piracy may simply be to offer users the best possible experience on your platform, while also offering content at a price they consider fair and reasonable.

Video pirates adapt their own technology as quickly as the flu mutates and, like the flu, it’s going to be impossible to eradicate fully.

Make your video offering very user-friendly, with a great user experience and top-notch quality at a fair price, and you’ll minimize your exposure to the video piracy flu.

Stay tuned.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn