"Wp piracy continuum" by Irdeto

WP_PIRACY_CONTINUUM_EN_2012
WHITE PA PER

The Piracy Continuum™
A framework for understanding consumer media consumption in the

evolving world of digital distribution.

September 2012

www.irdeto.com ©2012 Irdeto, All Rights Reserved.

The Piracy Continuum™ - White Paper

Table of Contents
Introduction 3

1. Criminals 5

2. Hackers 7

3. Casual Pirates 10

4. Frustrated Consumer 14

5. Confused Consumer 16

6. Consumers 20

Conclusions 23

2


Introduction

Content owners, content distributors and security vendors have traditionally

characterized digital “pirates” as a single group of criminals with ill intentions.

This, however, is a serious mistake, not only in understanding the reasons

behind why people turn to piracy, but also when identifying methods to mitigate

the threat and potentially learn lessons to generate unforeseen profit.

Imagine a doctor who only ever prescribed one medicine, regardless of the

patient’s actual condition. They might be able to address one of the patient’s

symptoms this way, but they’ll never cure the disease until they look at the

problem more holistically. This is the same type of situation that many in the

media industry are encountering; thinking that to protect their business, they

need to fight a single, monolithic “pirate” with an arsenal of weapons intended to

stop malicious activity. And until now, there was not a framework for looking at

the true nature of the piracy problem, and how to effectively manage it.

The industry’s over-generalized characterization of pirates has led to a mindset

where security has become nothing more than a line item cost of business;

just one of many on an overall bill of materials required to deliver media to

consumers. This approach and the ensuing decisions on security budgets,

technology and service choices, policy, lobbying, business and legal decisions

and other aspects of content delivery has led to an approach that doesn’t allow

content owners or platform operators to fully unleash their content’s potential.

Within an organization there are a number of different departments that all

deal with piracy issues in some way, including legal, operations, marketing and

distribution among others. Depending on their role, each group focuses on a

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specific aspect of piracy that is most relevant to their function. For example, legal

teams might be concerned with protecting intellectual property and trademark

rights, while operations take a view of protecting the actual asset through content

protection security, and business divisions make decisions about release

windows and channels of distribution. Due to their different areas of concern,

each has their own perspectives on piracy. Often working independently, these

groups must work together to manage piracy and understand that, ultimately, it

is impossible to stop all piracy from happening. However, smart steps can be

taken to increase the likelihood of consumers accessing legitimate content and

to manage piracy in an effort to reduce the pace at which it proliferates.

Interest in video is at an all time high. A few years ago there were a number of

challenges in getting high quality video content such as low Internet bandwidth

and a lack of media playback-enabled devices. Today, however, things have

changed drastically with consumers demanding more, both in terms of content

availability and breadth of accessibility due to more ubiquitous bandwidth, easier

tools to rip physical discs, as well as for uploading and downloading content from

various Internet sources. Put quite simply, piracy has gotten much easier and is

now completely mainstream. Understanding where the threats lie – and what

can be done to counter them – is pivotal to successfully growing in the future.

To Irdeto, piracy is not a single behavior, but rather a continuum of behaviors that

make up The Piracy Continuum. Within The Continuum, there are six groups of

distinct pirates:

1. Criminals – “I make money on your content”

2. Hackers – “Let’s see how fast I can crack the security”

3. Casual Pirates –”I’m only doing this once in a while... who’s it going to hurt?”

4


4. Frustrated Consumers – “I want to buy it but it’s not available”

5. Confused Consumers –”It’s legitimate... isn’t it?”

6. Consumers – “I’m happy with the content I already pay for or get for free.”

The Piracy Continuum™

Throughout this white paper readers will learn the distinct and subtle differences

between the various categories of pirates, understand consumer drivers for

piracy, and what opportunities are available to successfully turn pirates into

paying customers.

1. Criminals
“I make money on your
content”

GOAL: Deploy renewable content

security to prevent piracy and
criminals effectively gather information for legal

actions to take place.
Steal content for
commercial gain

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Criminals set up networks of employees to actively attack protection that is

guarding content with the intention of selling either the mechanisms for getting

around the security, such as set-top box smart cards, or the content itself. In

some cases, criminals even set up rings within Hollywood to capture a pristine

digital copy of a movie and then sell bootleg copies on the street of major

cities, creating a substantial revenue stream. Compared to Hackers, the

Criminals are organized as opposed to ad hoc and keep their methods to

themselves so that they can generate revenue by selling their piracy solutions.

Finding evidence against a criminal and gathering enough incriminating proof

to launch legal actions can be difficult and time consuming, although it is not

impossible. Criminal activity is an industry issue for pay TV operators and it

is hard to stop with conditional access or DRM systems because the content

can be streamed after it is decoded in the set-top box or on computer. In

addition, there are often multiple providers offering the same content, so

identifying where the pirated content is coming from can be a challenge

unless a technology like watermarking or fingerprinting has been used.

A real-world case is when Irdeto worked with operators in China to identify

pirated pay TV content. Criminals had intercepted satellite broadcasts,

encapsulated them in IP streams and rebroadcast them over the Internet for

commercial gain. Injured operators and Irdeto worked with legal authorities

by gathering evidence and submitting an official complaint to the local

enforcement agency. A plan was created to conduct simultaneous cross-

province joint enforcement raids which successfully located an array of pirate

equipment. The end result of the raid was the seizure of the confiscated

equipment, closure of the pirate network and a maximum fine under the

Administrative Penalty Provisions of China.

6


Picture taken of confiscated piracy equipment

2. Hackers
“Let’s see how fast I can crack
the security”

GOAL: Increase the security put in

place to slow down their progress.
hackers

Steal content and
distribute it over the
Internet

Hackers actively try to break down the protection that is securing content to

gain access to it. However, the ultimate goal is not the content itself, but the

intellectual satisfaction of finding ways to bypass the security. They view this

as a challenge to test their skills against professionals in order to gain

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reputation with their peers. There are a number of tools that have been

created to bypass security measures, and if those do not work, the Hackers

will modify them or create new ones.

Ultimately, there is no such thing as a completely secure system. The DeCSS

protection on DVDs was cracked by DVD Jon in 1999. High definition discs

were promoted as being uncrackable, but in 2007 both HD DVD and Blu-

ray™ discs were cracked and their contents proliferated on the Internet. Of

course, back then file compression was rudimentary with the first HD DVD

movie “Serenity” being 19.6GB and the first pirated Blu-ray movie “Ice Age 2”

was 22GB. Today, a high definition movie is around 4GB which makes it faster

to download over the Internet. If the content that an operator is offering is of

value then the system they are using will be under attack.

Many Hackers communicate with their peers to work together to bypass

different parts of content protection schemes. Alone, few Hackers could

penetrate all of the defenses that are put in place, but working together they

are able to find ways to access the content. There are groups formed, often

online, with message boards and sites focused on how to overcome the

challenge of attacking a secured system. However, due to the increased

visibility of hackers over the recent year, more underground and private

channels are being used to reduce their visibility.

8


Screen shot of RankMyHack, a website for hackers to post their “accomplishments”

Though the Hackers motivations are entirely different than Criminals (they

don’t seek commercial gain from their activity), the economic impact on the

Content Owner and their distribution chain can be equally as damaging as

Criminal activity. This is because once the hacker removes the protection

and makes it available online a snowball effect can occur as the content can

be made available throughout a number of different online locations. While

the tools that hackers develop are not created with the intent to commercialize

or spread beyond their relatively small community of like-minded individuals,

that work can be easily adopted by Criminals who do seek to exploit hacks for

commercial gain by making them more consumer friendly and spread to a

wider audience.

It should be noted that the separation between the Hacker and Criminal

groups does not imply that copyright infringement is acceptable. It is simply

a way to qualify their motivations to better understand what drives them to

circumvent content security.

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To counter this group and prevent their work from becoming commercially

exploited, content providers should use dynamic security systems (whether

conditional access or DRM-based) that are renewable and capable of adapting

quickly to unforeseen threats.

3. Casual Pirates
” I’m only doing this once in a
while... who’s it going to hurt?”

GOAL: Remove content that is being

illegally accessed from the Internet.
casual pirates

Download content
for personal use

A Casual Pirate is someone who knows how to download illegal content and

occasionally chooses to do so. The challenge when dealing with this group is

that they do not believe they are doing anything wrong, that their individual

activity will have impact or worse yet, that they may not care that it is illegal.

According to a study by Advanced Television, 70% of people do not believe it

is wrong to download content as long as they are not making money from

selling it to others.

The Casual Pirate is often a voracious consumer of video, and uses a variety

of easily available resources on the Internet to find and obtain the content

they want to consume – whether from Peer to Peer (P2P) sites, Cyberlockers,

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Usenet newsgroups or streaming sites. They don’t perceive a need to pay for

it, even if it’s easily available at a reasonable price. They download it because

the can, and because it satisfies their personal or family content consumption

needs at a price that can’t be beat: free. Increasingly, they use VPN proxies

to defeat geographic restrictions and to hide their activities from their ISPs,

which is especially important in regions where piracy activity is monitored

and punished. The Casual Pirate does not attack content protection systems

to gain access to content, so if the content is not available from pirate sources,

they may turn to legitimate sources for the content.

The content release window is one reason why this group chooses to pirate

content, as copies are available online well before they can be legitimately

purchased. For example, the movie “Sherlock Holmes: A Game of Shadows”

was released on disc June 12, 2012. However, a high-quality DVD rip was

already available online on April 15, 2012. This was nearly two months before

it was legally available and potentially resulted in a reduction of the total

revenue generated by the movie.

A DVDRip was available on April 15, 2012 on Pirate Bay while the DVD release was scheduled for June
12, 2012.

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Another example would be movies that are still in cinemas. Though the

quality of the download will not be DVD or Blu-ray quality, it can be “good

enough” for those not wishing to spend the time and money required to see it

on the big screen. The Hunger Games made box office records in 2012, at

the time making the third highest opening weekend of any film in history. The

movie was released on March 23, 2012 and video camera-recorded torrents

were available the next day.

A CAM version was available on March 24, 2012 on Pirate Bay – the day after the movie hit theaters.

Though Casual Pirates will not create new ways to circumvent content

protection schemes, they have the potential to grow very quickly as broadband

speeds increase and the tools become increasingly easy to use. Some

programs, like Vuze, allow consumers to subscribe to an RSS feed that

automatically downloads all their favourite content, transcodes it to a variety

of mobile device-friendly formats and automatically exports it to popular

programs like iTunes – creating a kind of automated multi-device BitTorrent

PVR. The skill required to do this has decreased markedly over the last

several years, while consumer knowledge of the internet, especially among

the younger generations, has increased.

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In a world where operators worry about cord cutters there is another growing

threat that they are facing which is more difficult to quantify and convert to

paying subscribers. This threat is the generational cliff jumper. These are the

young people, most often the student population, who grew up downloading

and trading music with their friends, and have never subscribed to a pay TV

service. They’re technologically savvy and have already found alternative

methods to access the content they want. They are equipped with the devices

and Internet connection needed, in a setting where they can get information

on how to access content online from other students, such as in a dorm room,

and are empowered with a sense of online anonymity.

It is difficult to measure the impact of generation cliff jumpers on the pay TV

business, but they may be part of the reason that subscriber rates are falling

in many parts of the world. For example, Convergence Online predicts 112,000

new pay TV subscribers were added in 2011 compared to 272,000 in 2010,

showing a decline in new subscriber traction.

To address this part of the Piracy Continuum, a variety of measures must be

taken, using technologies like watermarking to identify the source of content

leakage, piracy management services to track down illegal content on the

Internet and get it removed and legal measures to address to worst offenders

and educating the Casual Pirated about the economic impact of their “casual”

activity. In addition, Over-the-Top and TV Everywhere services like Comcast

XFinity TV, ViaPlay, Mediaset Premium Play and many others offer consumers

a legitimate alternative to piracy that they may even get at no additional cost

beyond their basic pay TV subscription, reducing their overall need to commit

piracy.

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4. Frustrated Consumer
“I want to buy it but it’s not
available”

GOAL: Provide the content and

services that consumers are
frustrated consumers
demanding so that they will not turn

to other providers.
Can’t get what
they want legally

The Frustrated Consumer is exactly what it sounds like. This is someone who

is looking for something and is frustrated because it is not readily and legally

available. In some cases, this can be an accessibility issue, such as streaming

video content to a particular tablet that is not supported. In other cases it is

the lack of content availability, most often due to geo-restrictions. If operators

are not offering what consumers want, they are going to look for alternative

methods to access it, including going to a competitor or moving up The Piracy

Continuum and becoming a Casual Pirate.

Geo-restrictions and release windows are often difficult for consumers to

understand. The Internet has broken down walls making it easier for digital

content to flow anywhere. In a global, Internet world, there is an increasing

lack of understanding and acceptance of the geographic boundaries

associated with traditional content distribution schemes, especially as content

is a major topic of conversation on global social networks like Facebook and

Twitter.

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One common example of geo-restricted content was anime. These shows

were predominantly created in Japan and were difficult to obtain in other parts

of the world. There is a very dedicated fan base but, until recently, they could

only purchase if they ordered them from Japan and had DVD players that

could play region code 2 protected discs. Geo-restricted content is still

happening today as content is not released at the same time worldwide, or

released in certain region at all.

Today, one of the most common examples of this issue is popular U.S. series,

which are eventually distributed to individual TV stations globally, but can

take months if not years to subtitle or dub and work into a regional broadcast

schedule. This has created a booming market for illegally distributed TV

shows, which usually become available (with advertising removed) within

hours of their first broadcast – especially if they are the most popular ones.

Within hours, many of them get downloaded by tens of thousands of consumers

worldwide.

Fortunately, this group is willing to pay for content and will seek out legitimate

means to acquire it if it is readily available at a reasonable price, within a

reasonable period, and on their devices of choice. One way to do this is to

offer content over broadband to connected devices so that they can view it on

the device and at the time of their choice.

The problem of geographic restriction fuelling piracy will however continue to

remain until content owners change their distribution strategies to meet

changing consumer needs. Some are already doing this. American Idol is

broadcast the same week in both the U.S. and the U.K., the popular British

science fiction series Doctor Who is broadcast nearly simultaneously on both

15


continents, and the global finale of the TV series Lost was broadcast at the

same exact moment in eight countries around the world (regardless of time

zone) to try to give global fans the opportunity to all experience the end of the

series at the same time as American fans did.

Location of downloaders of a live event using BitTorrent in 2011

5. Confused Consumer
“It’s legitimate... isn’t it?”

GOAL: Eliminate pirate business

models that present confusing sites

to unknowing consumers”
confused consumers

Unknowingly
consume illegal
content

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The Confused Consumer is starting to find video online but is not aware that

the content may be illegally placed on the site they are visiting. There are a

number of sites that stream content but do not have the legal rights to do so.

In most cases the content is uploaded by users, but in an increasing number

of cases this content is rebroadcast by Internet criminals seeking to profit

from their activity.

One of the most confusing aspects of online video for consumers is when

they search for popular content and end up on sites that appear to be legitimate

– including banner advertising from reputable companies – but are actually

set up by illegal re-broadcasters seeking to profit from ad revenue generated

on their sites. An innocent consumer may search for their favorite sports team

and accidentally happen upon a streaming site with a live broadcast of a

match in progress. Or they may search for their favorite TV show and end up

at a site that is streaming it at the same time that it is playing on a pay TV

channel.

From a Confused Consumer’s point of view, they were simply lead to a

streaming website through a common Internet search, found a piece of video

they wanted to watch and pressed the play button. The average consumer

has no idea whether the videos were legally posted or not. Many others sites

operate in a similar vein by having content available with the consumers not

being aware of the source.

In January, 2012 the Megaupload site was taken down for copyright

infringement and conspiracy to commit racketeering. Megaupload had over

50 million visitors per day hosting 12 billion unique files for over 100 million

users. Without a subscription, visitors could watch 72 minutes of video and

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then have to wait for a half hour before watching again. However, the content

was uploaded by individuals and was not always legitimate, and according to

the indictment Megaupload made no significant effort to indentify users who

were using the Mega Sites or service to infringe copyrights, to prevent

uploading of infringing copies of copyrighted materials or to identify infringing

copies of copyrighted works.

Streaming video sites with infringing content like Megaupload, and there are

many, cause a great amount of confusion for consumers. Visitors do not have

to download anything, so to some this may not feel like piracy because they

do not have anything after the session is over. As well, advertising on these

sites can make it appear to be legitimate. In some cases, the advertiser may

not even be aware that they are supporting a pirate site, and thus supporting

the activity. For example, SideReel streams content and has advertisements

from Comcast, Hulu, ABC, iTunes, Rogers, the University of Liverpool for

Masters and Doctoral Degrees as well as others. This gives the impression

that the site is legitimate as reputable companies are “sponsoring” it.

18


Screen capture of a streaming website with advertisements making it appear legitimate

The Confused Consumer group is starting to become aware of alternative

content sources that are available but are still willing to pay for the content

they view. However, as they are now able to find content from alternative

sources they may look at reducing their subscription package. To counter

this trend operators and studios have to mark content so that it can be

identified and issue takedown notices to remove the content that is made

illegally available. They also have to attack illegal streaming by working with

advertisers to remove their ads from streaming sites, thus breaking the pirate’s

19


business model. As well, content has to be made available to the Confused

Consumer in the way they want, and they must be effectively educated on

how to access it. This provides the opportunity to expand beyond broadcast

transmission to offer broadband services providing additional value to the

consumer.

6. Consumers
“I’m happy with the paid access
I have today”

GOAL: Continue to give consumers

what they want so that they stay loyal,

consumers and be prepared to meet their

changing demands in the future.

Buy content through
legitimate channels

The final group is the Consumer. These are what would be considered

“traditional” pay TV subscribers who have access to content solely through

legitimate means, and are satisfied with what is offered. Pay TV services

have grown dramatically since they were launched in 1948. Within the first

four years there were 70 operators serving 14,000 subscribers. Today, there

are around 1000 operators with over 700 million subscribers world-wide, not

to mention dozens of over-the-top (OTT) providers with more being launched

all the time.

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There could be a number of reasons why this group is content today. The

consumer could simply be satisfied with the offering, meaning that they are

getting the content they want on their device of choice, most likely the TV.

They may have higher tier subscription packages giving them access to more

content, such as live sports or movies. They may also be augmenting their

pay TV subscription with a reasonably priced and easy-to-use OTT offering,

such as Netflix or Hulu, to get the content they want.

Apple already controls 65 per cent of digital movie sales, according to research

by IHS Screen Digest. Digital delivery of content, saw sales rise 51 per cent

to $3.42 billion in 2011, up from $2.26 billion in 2010. Netflix has over 26

million subscribers, and Hulu Plus has grown to more than 2 million paying

subscribers in only a few years.

Consumers may also not be aware of these services, have the devices

required to use them, or possess the knowledge required to do so. For
example, they may not be aware of an iPad app that is available, not own an

iPad, or not understand how to set up a wireless network within the home to

access content on these types of devices. As they say, ignorance is bliss, but

if these consumers become more aware of services, and how to access them,

they will become more demanding and will be looking to their pay TV operator

to meet their need. If the operator doesn’t meet the need, they risk watching

the consumer shift to a more undesirable position on The Piracy Continuum.

Alternatively, this group may not consume much video content and may be

satisfied with little, or no content. This could be a result of them reducing their

subscription to a lower tier package, called cord shaving, or cancelling their

service altogether, called cord cutting. According to Convergence Online

there will be 2.65 million cord cutters in the USA by the end of 2012 with

21


nearly half of them coming from the past few years as alternative services

become available.

Recent data from Parks Associates has identified the top TV features that

appeal to households in different regions. Interestingly, catch-up TV content,

either on the TV or on a PC, is the most demanded feature throughout the

world. This shows that consumers want access to the content that is most

interesting to them available at their convenience.

Anytime / Anywhere Access
Appeal of Advanced TV Services
"Please rank the top three TV features appealing to you and your household"

France Spain U.K. Italy Germany US

Catch-up TV 3D TV / Movies Catch-up TV Catch-up TV Catch-up TV Catch-up TV
on TV on TV on TV on TV on TV on TV

Catch-up TV Catch-up TV Catch-up TV 3D TV / Movies Catch-up TV Catch-up TV
on a PC on TV on a PC on TV on a PC on a PC

View digital Catch-up TV Video handoff Catch-up TV 3D TV / Movies Music library
photos on TV on a PC to CE devices on a PC on TV on TV

3D TV / Movies 3D TV / Movies View digital 3D TV / Movies View digital Video handoff
on TV on a PC photos on TV on a PC photos on a TV to CE devices

Wireless mobile- Wireless mobile- Wireless mobile-
3D TV / Movies View digital to-TV photo
View digital
to-TV photo to-TV photo
transfer transfer on TV photos on TV transfer photos on TV

Wireless mobile- Wireless mobile-
Music library View digital Music library Video games
to-TV photo to-TV photo
on TV photos on TV transfer transfer on TV on a TV

Video handoff Video handoff Music library Video handoff 3D TV / Movies 3D TV /
to CE devices to CE devices on TV to CE devices on a PC Movies on TV

Content Program DVR
3D TV / Movies Music library Music library Video handoff
discovery with with mobile
on a PC on TV mobile phone on TV to CE devices phone 3

Source: Parks Associates Survey
© Parks Associates 2012

Appeal of Advanced TV Services from various countries provided by Parks Associates

This group is considered the “bread and butter” for pay TV operators as they

are willing to pay for content and are pleased with what they receive making

them loyal subscribers. However, as new options become available they may

22


supplement their subscription with alternative sources which may lead them

to reduce, or even eliminate, their existing subscription.

To keep Consumers happy, operators must offer them the content and

services they want, and educate them on their availability and how to get the

most value from them. The challenge with this group is to offer services

before they start to become dissatisfied and seek out alternatives, which

could move them to become Confused or Frustrated Consumers.

Understanding the patterns of both the Frustrated and Confused and analyzing

it in context with the Consumer gives the greatest business intelligence

insights insofar as programming and other offers.

Conclusions
The industry has traditionally looked at consumers and hackers as singular

groups. This limits the ability to properly address the specific issues that they
create, whether that is understanding what their needs are and how to address

them or to realize the manner and motivation for them access illegitimate

content and slow their progress. By breaking down these groups further,

specific issues and trends can be identified and solutions can be created.

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