On the heels of a report that claims revenue lost to video piracy had a $29.2 billion impact on the US economy alone, researcher Parks Associates this week offered a more conservative number. For the US streaming and pay-TV industry, specifically, Parks said about 27% of US broadband households engage in either piracy or account sharing. The cost to streaming companies and pay-TV companies: $9.1 billion in lost revenues in 2019. That number will grow to more than $12.5 billion by 2024.
The report, 360 Deep Dive: Account Sharing and Digital Piracy, said a disproportionate share of revenue lost to video piracy is from consumers under age 35, and households with low annual incomes.
Overall, Parks said consumers who report viewing an OTT video service for free but without ads are 22% more likely than average broadband households to subscribe to OTT services. They’re also three times as likely to use ad-supported services, and twice as likely to use transactional online video services.
OTT success fuels revenue lost to video piracy
Growth in connected device ownership has shifted the focus of pirates towards the online video ecosystem – 20% of US broadband households are using a piracy app, website, or jailbroken device.
“Growing subscriber numbers and an increased number of services signal a very healthy OTT market, but more services and aggressively promoted content could incite more piracy over time,” said Brett Sappington, senior research director and principal analyst at Parks. “Consumers will hit an upper limit to spending eventually. When that happens, they will resort to pirate tactics to get the content that they want, particularly for sports and other content where trials are not available.”
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“Most pirates also subscribe to at least one OTT service; they are not simply thieves looking to steal content but are video enthusiasts who engage with many different services,” Sappington said. “OTT services could better reach these consumers through ad-based content, which also aligns with these users’ general belief that ‘movies/music should be given away for free.’”
Additional data from the study found:
- 13% of consumers report using a piracy website or app;
- 19% of US broadband households experience account-related issues with an online video service; and
- Penetration of OTT paid services was up 13% over the past year, while free services increased 23% over 2018.
The bottom line…
Sharing digital credentials to access content is rampant. And, depending upon who you ask, password sharing – even outside family members – is either a massive problem or just part of the video ecosystem. Regardless, both cut into final revenue numbers for streamers, pay-TV providers and content owners.
While revenue lost to video piracy is growing, so is the overall revenue. Legitimate revenue, as notes Analyst Simon Murray from Digital TV Research, is growing faster, overtaking piracy in 2013.
And, he said, “the gap between the two measures is widening.”
Digital rights management, watermarking and taking aggressive legal action against pirates will continue to help that gap widen. Still, pirates, like the flu, mutate to resist pressure, both are nearly impossible to eradicate.
The best solution?
- Offer users the quality experience on your platform that they can’t get from a pirate site;
- See password sharing for what it is: A free trial. Try and convert those trials to legitimate accounts;
- For an SVOD provider, consider a hybrid service, where ads – likely pre-roll ads – create an additional line of revenue… even a small one will mitigate the revenue lost to video piracy; and,
- Price content at a level that makes pirating it illogical.