The Pay-TV Innovation Forum is a new global research programme for senior pay-TV executives, developed by NAGRA and designed to explore and catalyse innovation across the pay-TV industry, at a time of unprecedented change.
As part of the programme, we are publishing a series of interviews with leading pay-TV industry executives from around the world to explore their views, perspectives and experiences of innovation in the pay-TV industry.
Industry executives in North America and Latin America that have taken part in Pay-TV Innovation Forum think that content piracy has become a more significant issue in the pay-TV industry over the last couple of years due to a variety of reasons, including the emergence of easily accessible illegal IPTV set-top boxes, growing costs of pay-TV subscriptions, increased sophistication of pirates, and difficulties in measuring and tracking piracy. This issue is particularly acute in Latin America. Alianza, the anti-piracy association of the leading companies in the Latin American pay-TV industry, estimates that almost a third (29%) of pay-TV households in Latin America are served by pirate providers, resulting in significant pay-TV operator and programmer revenue losses, lost jobs and evaded taxes in the region.
In this interview, Michael Hartman, SVP and General Counsel at DIRECTV Latin America shares his views on the threats posed by content piracy, potential industry responses and future developments across the Latin American pay-TV market.
What’s your current view of the threat posed by piracy?
Piracy is a massive threat for everyone in the industry, especially in the Americas. Market analysis indicates that more than 25% of audio-visual service consumers in Latin America get their content through illegal or pirated services, including online. It has become a bigger threat over the last couple of years, as the internet has enabled new forms of piracy – and we have also seen a significant improvement in the quality of pirated services. Consumers used to buy illegal copies of DVDs, or use online pirate sites that were difficult to find and often delivered poor video quality. Today, however, consumers can easily buy set-top boxes with pirated apps, which offer great user interfaces and give access to high quality content. Content piracy is increasingly moving to these types of services.
Some pay-TV businesses see piracy as an inevitable “cost of doing business” – do you share that view?
That is very mistaken in my view. It is based on them not looking into how piracy impacts their business, leading to complacency and a lack of analytical rigour that I find surprising. The impact of piracy on pay-TV businesses is extensive, especially in Latin America, where it is not uncommon to find pay-TV operators that do not pay for content and distribute it illegally over their networks. In some Latin American territories these operators are the main competitors to legitimate pay-TV businesses.
What can pay-TV providers do as individual companies to reduce the impact of piracy on their business?
There are various actions, both proactive and reactive, that pay-TV operators take in order to combat piracy. For example, when satellite operators, such as DirecTV, get information that their boxes are used to redistribute signals to small illegal cable networks, they take action to shut them down. Some cable operators try to combat piracy happening over their broadband networks. Cable operators sometimes are conflicted because some consider all data running through their networks as a good thing. However, as they are increasingly trying to add value to their services by offering content, they are slowly realising that pirated content is competing with their value propositions and are starting to do more to combat piracy.
However, no individual company will solve the piracy problem alone. Industry-wide efforts are absolutely necessary, because piracy essentially presents the video distribution industry with a collective action problem. It does not make sense for one company to put resources into combating piracy when the benefits of such action accrue to everyone in the value chain. From the perspective of a single company, it is irrational to dedicate more than a certain amount of resources, time and effort to combating it. The only way you can rationally combat piracy, given its scale, is grouping together.
What industry actions are the most effective at addressing piracy?
There is no silver bullet - it is a problem that we need to combat using a multi-faceted approach, including industry coordination, technological solutions, legal action, lobbying, and education. When multiple companies get together it enhances their ability to do lobbying to improve laws and drive governmental enforcement, where appropriate. Grouping together creates scale, allowing us to build tools to monitor and investigate pirate activity more effectively. It also makes the enforcement efforts more effective, because it brings to the same table a variety of plaintiffs that have been affected by piracy.
The strategies to combat piracy at the end-user level are different. They tend to be less enforcement related and more about educating consumers, making it difficult for them to get access to illegal content, and improving the value proposition of existing pay-TV services to make sure consumers can get the content they want the way they want at a more reasonable cost.
What are the technological solutions that help pay-TV businesses fight content piracy more effectively?
Content watermarking is one that can contribute to enforcement efforts, and the sophistication of watermarking techniques is increasing. It allows companies to detect pirated content, understand where it is located and alert consumers about the content that is pirated. It is a complex solution, but it will grow in importance.
What do you think are the greatest barriers to solving the problem of content piracy and how can they be overcome?
First of all, the industry needs to coalesce around the importance and impact of piracy, and work together to combat it. Secondly, the laws need to be updated to give legitimate companies tools to combat piracy effectively. It is very difficult to do this today, because of the evolving nature of online piracy and pirates often operating outside of the countries that their customers are based in, shielding them from legal action. So even if operators identify illegal services, they legal means to act against them are still limited. And then the third thing is raising awareness among the end-users as well as within the industry.
Will content piracy be more or less of a threat to pay-TV businesses in five years’ time?
I think that piracy will remain a major threat to the industry. Pay-TV businesses are undergoing significant changes in the model of how they deliver their services, eroding value and requiring significant investment to respond to these changes. At the same time, pirates are getting more sophisticated and there are more ways for consumers to get audio-visual services illegally, either for free or at very little cost.
 Pay-TV signal piracy in Latin American and the Carribean, Alianza (2016) - http://www.alianza.tv/files/LatAmTVSignalPiracy.pdf