Profit, Not Ideology, Motivates Cyberlockers that Facilitate Copyright Infringement

copyrightwarningInformation wants to be free” is a standard rejoinder to criticism of online entertainment piracy. Such a sentiment may motivate some copyright thieves, but profit, not ideology, drives the proprietors of “cyberlockers” whose business is trafficking pirated entertainment content. A recent study by the Digital Citizens Alliance (DCA)—”Behind the Cyberlocker Door“— has laid bare that reality. These websites generate profit margins that lawful businesses can only dream of, and they do so on the backs of countless workers in the music, movie, and television industries.

DCA analyzed data from the 15 top direct download cyberlockers and 15 top streaming cyberlockers. It found that 78% of the files on the direct download sites, and 84% on the streaming sites, were infringing content such as music, movies, and TV shows. Total annual revenue for the 30 businesses was $96.2 million, which averages out to $3.2 million a site. The average profit ratio of the direct download sites was 63.4%, with one site enjoying 88.5%. For the streaming cyberlockers, the average ratio was 87.6%, with the highest coming in at 96.3%.

Much like people who run the illicit cyberlockers, some of those who unlawfully access and share copyright-protected content may claim to be advancing an extreme public commons ideology or “sticking it to Big Entertainment,” but the volume of such piracy reflects a baser motivation. Pirated content consumers’ catchphrase shouldn’t be “information wants to be free;” it should be  “we want free information.”

Copyright-infringing consumers can no longer claim that they seek pirated content because music, movies, and TV shows aren’t available digitally for a reasonable price. Huge music libraries can be accessed for free or low-cost at outlets such as Spotify, Pandora, Amazon Music, and iTunes. Online options for TV and movie content continue to multiply. A recent KPMG study found that nearly all of the most popular TV shows and movies of the past three years (which are, not surprisingly, also the most pirated), are available through video-on-demand services. A story in Variety noted that immediately after AMC’s Breaking Bad won big at the 2014 Emmy Awards, online piracy of the show soared by 412% despite the entire series being available on Netflix. The story added, “That weakens the claim that piracy behavior is primarily driven by the lack of availability through legitimate avenues—and instead shows that pirates are motivated by getting something for nothing.”

A vigorous debate has developed in recent years over numerous aspects of copyright protection. There can be little doubt, however, that cyberlockers are profitably inducing copyright infringement on a massive scale. The discussion should thus not be over whether infringement is occurring, but what measures legitimate businesses can take to deter and stop it.

These sites have low operating costs and earn profits from advertising and from selling premium access rights. The reputable brands whose advertisements have appeared on the cyberlockers have a stake in preventing such infringement. Given the rise of automated ad-buying technologies, it is likely that most ads for big-brand companies appeared without their knowledge or consent. DCA pointed out that a select few online advertising networks were responsible for the vast majority of cyberlocker advertisements, the most active being British Virgin Islands-based Propeller Ads Media.

Entertainment content providers have urged advertising agencies and their trade associations to address ad-supported online piracy. Over the past two years, advertisers have taken strides toward self-policing, such as facilitating the use of “digital ad assurance services.” A June 26 letter from the entertainment business coalition Creative Future to three leading advertising trade groups thanked the advertisers for pledging to take further action to reduce online piracy.

A second set of legitimate businesses—credit card companies—also play a significant role in facilitating cyberlockers’ profits. The DCA report found that 29 of the scrutinized cyberlockers accepted Visa and MasterCard payments for premium copyright-infringing services. PayPal, which has made a commendable effort to reject its payment services’ use by cyberlockers, was a payment option on only one website. Credit card companies whose logos appear on cyberlockers and whose services enable premium infringement charges should follow PayPal’s lead.

The Band (source: Wikipedia Commons)
The Band (source: Wikipedia Commons)

Content pirates and their sympathizers tell us we shouldn’t bemoan “miniscule” profit losses by rich Hollywood studios and the recording industry. But evidence abounds of piracy’s concrete impact on everyone in the entertainment industry, from studio executives on down to individual singers. For instance, one study released in July demonstrated that movies leaked online before their theatrical release lost on average 19% of their box office revenue. Or consider the story of filmmaker Ellen Seidler compellingly told by Fortune’s great Roger Parloff. Ms. Seidler’s indie film opened to rave reviews, but once online pirates circulated it, her revenues virtually ceased, leaving her deeply in debt and unsure about her filmmaking future. Finally, the Los Angeles Times related in a January 2013 article the plight of the late Levon Helm of The Band. Helm lived for many years off song royalties but the growth of music piracy, and the onset of throat cancer, forced him back out on tour to pay for medical bills.

Online copyright infringement is far from a victimless crime. “Free” information can come at a high cost.

Also published by Forbes.com on WLF contributor page

4 thoughts on “Profit, Not Ideology, Motivates Cyberlockers that Facilitate Copyright Infringement

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  2. Pingback: Update: Senate Judiciary Committee Chairman Urges Payment Processors to Deter Online Copyright Piracy | The WLF Legal Pulse

  3. Pingback: Advertisers Develop Voluntary Program to Deter Unwitting Online Ad Support of Copyright Pirates | The WLF Legal Pulse

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