Streaming Piracy Is Now a Billion-Dollar Industry

Tami Abdollah

Tami Abdollah was dot.LA's senior technology reporter. She was previously a national security and cybersecurity reporter for The Associated Press in Washington, D.C. She's been a reporter for the AP in Los Angeles, the Los Angeles Times and for L.A.'s NPR affiliate KPCC. Abdollah spent nearly a year in Iraq as a U.S. government contractor. A native Angeleno, she's traveled the world on $5 a day, taught trad climbing safety classes and is an avid mountaineer. Follow her on Twitter.

Streaming Piracy Is Now a Billion-Dollar Industry
  • Pirated streaming subscription services, a billion-dollar industry with large profit margins, have been on the rise for the last two years.
  • They give users access to premium cable and sports content, still-in-theater films, DVD content, Amazon, Netflix and more, for $10 to $15 a month.
  • Why it matters: The convenience comes at a steep cost to the U.S. economy, roughly $29B, including an impact to jobs. The Motion Pictures Association says combating such illicit streaming is their "highest priority."

So long, Napster and Limewire. The next generation of illegal streaming is a growing, billion-dollar industry with big profit margins and its own pirate ecosystem, according to a new report.

The report jointly released this month by the nonprofit Digital Citizens Alliance and NAGRA, a digital TV technology provider, found that such pirated streaming subscription services often mimic the look of legal content providers and are being used by an estimated nine million subscribers in the U.S.

It works like this: Users download an app, click on a link to a media player, or access an already bundled device, for a monthly fee of $10 to $15, gaining access to thousands of channels on-demand videos. They include many movies still showing in theaters, full seasons of TV series and a cornucopia of content from the big streamers.

Customers may not even be aware that their subscription service is fueled by pirated content — though that's debatable. The convenience comes at a hefty cost for those whose jobs depend on the creative industry. A 2019 study estimated that global online piracy has cost the U.S. economy $29.2 billion in lost revenue annually.

An illustration from the report released this month by the nonprofit Digital Citizens Alliance and NAGRA shows a typical pirate streaming service.

"If it's too good to be true, it's too good to be true," said Jan van Voorn, the executive vice president and chief of global content protection for the Motion Picture Assn. "How would it be possible to get all the sports channels, all the cable channels, all the DVD content, Amazon, Netflix, plus what's in theaters? It's something fishy that can't be correct and would never be correct."

Van Voorn said the Motion Pictures Assn. has seen a rise in these new types of pirated subscription services in the last two years. The association has helped create the Alliance for Creativity and Entertaining (ACE) with major creative content companies to combat the challenge of online priracy. ACE has pushed forward with civil and criminal actions, visits to storefronts and takedown actions around the world.

"We have all these services on the radar," van Voorn said. "This is ACE's highest priority and we're addressing it with all the resources we have."

Pirated subscriptions can be purchased through 3,500 storefront websites, on social media pages or online marketplaces like eBay. For the pirates targeting the U.S. market, it's a lucrative business, generating $1 billion in annual revenues in the U.S. with profit margins ranging between 56% to 85%.

The marketplace demand has also led to an ecosystem that includes wholesalers and retailers, who rely on legitimate players like hosting services, payment processors and social media to operate.

The Digital Citizens Alliance/ NAGRA report illustrates the ecosystem pirate services leverage to get their content to (sometimes unsuspecting) subscribers.

These "pirates" also make money by teaming up with hackers who install malware within their free apps. That enables the hackers to steal subscribers' personal and financial data, use their computers to mine cryptocurrency or possibly also harness their systems to create a botnet for cyberattacks, the report found.

NAGRA also discovered that subscribers' internet connections can be turned over to others for illegal activities like accessing child pornography. The illegal streaming subscriptions can also let customers skirt a U.S. ban to watch the channel Al-Manar, a "specially designated global terrorist entity."

"When it comes to piracy, the scope of the risk to consumers, small businesses and others is in direct proportion to the size of the industry, which is why we need to stop the reach and depth of this ecosystem before it grows even bigger," said Digital Citizens Alliance Executive Director Tom Galvin. "It's time to take this billion-dollar black market seriously."

___

Do you have a story that needs to be told? My DMs are open on Twitter @latams. You can also email me at tami(at)dot.la, or ask for my contact on Signal, for more secure and private communications.
tami@dot.la

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Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

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The Marina del Rey-based unicorn, which makes cartoon-like avatars for celebrities and aims to “build an avatar for every single person on Earth,” didn’t go under. Rather, Genies announced it would stay quiet for a while to focus on building avatar-creation products.

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Jamie Williams
­Jamie Williams is the host of the “PCH Driven” podcast, a show about Southern California entrepreneurs, innovators and its driven leaders on their road to success. The series celebrates and reveals the wonders of the human spirit and explores the motivations behind what drives us.
Jason Wise holding wine glass
Image courtesy of Jason Wise

Jason Wise may still consider himself a little kid, but the 33-year-old filmmaker is building an IMDB page that rivals colleagues twice his age.

As the director behind SOMM, SOMM2, SOMM3, and the upcoming SOMM4, Wise has made a career producing award-winning documentary films that peer deep into the wine industry in Southern California and around the world.

On this episode of the PCH Driven podcast, he talks about life growing up in Cleveland as a horrible student, filmmaking, Los Angeles and his latest entrepreneurial endeavor: A streaming service called SOMMTV that features–what else?–documentaries about wine.

The conversation covers some serious ground, but the themes of wine and film work to anchor the discussion, and Wise dispenses bits of sage filmmaking advice.

“With a documentary you can just start filming right now,” he says. “That’s how SOMM came about. I got tossed into that world during the frustration of trying to make a different film, and I just started filming it, because no one could stop me because I was paying for it myself. That’s the thing with docs,” or “The good thing about SOMM is that you can explain it in one sentence: ‘The hardest test in the world is about wine, and you’ve never heard about it.’”

…Or at least maybe you hadn’t before he made his first film. Now with three SOMM documentaries under his belt, Wise is nearing completion of “SOMM4: Cup of Salvation,” which examines the history of wine’s relationship with religion. Wise says it’s “a wild film,” that spans multiple countries, the Vatican and even an active warzone. As he puts it, the idea is to show that “wine is about every subject,” rather than “every subject is about wine.”

For Wise, the transition to launching his own streaming service came out of his frustration with existing platforms holding too much power over the value of the content he produces.

“Do we want Netflix to tell us what our projects are worth or do we want the audience to do that?” he asks.

But unlike giants in the space, SOMMTV has adopted a gradual approach of just adding small bits of content as they develop. Without the need to license 500 or 1,000 hours of programming, Wise has been able to basically bootstrap SOMMTV and provide short form content and other more experimental offerings that typically get passed over by the Hulus and Disneys of the world.

So far, he says, the experiment is working, and now Wise is looking to raise some serious capital to keep up with the voracious appetites of his subscribers.

“Send those VCs my way,” Wise jokes.

Subscribe to PCH Driven on Apple, Stitcher, Spotify, iHeart, Google or wherever you get your podcasts.

dot.LA reporter David Shultz contributed to this report.

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