1

H A S W E B V I D E O R E P L A C E D

P E E R - T O - P E E R ?

T H E P I R A C Y L A N D S C A P E :

© 2018 I rdeto. A l l R ights Reserved.

2

EXECUTIVE SUMMARYThe media and entertainment landscape has grown and evolved over recent years as bandwidth and viewing technology have advanced to meet a growing demand for content. Unfortunately, the piracy landscape has grown and evolved due to the same changes in technology and demand. Users can choose from a wide range of devices to stream movies and TV shows, from their desktop computers and smart TVs to their smart phones, laptops and tablets. However, as the average user considers the many available sites for accessing content on the internet, they find legal sites, illegal sites and illegal sites masquerading as legal sites.

Everyday consumers may be unlikely to understand the risks associated with clicking on links or downloading content from an illegal site. The interaction between users and savvy piracy site operators creates a false sense of credibility in the online piracy ecosystem, where piracy sites charge for easy access to a wide range of infringing content that they acquired at no cost. The ecosystem also relies on committed pirates – i.e., users who know the sites are illegal, understand the risks and yet prefer to access their content exclusively at illegal sites.

As online piracy keeps pace with advances in technology, web video sites have been rising in popularity and, in some high piracy countries, drawing more traffic than P2P sites. This report examines these trends in the current piracy landscape to answer the following questions:

• Are web video sites replacing P2P sites as the primary platform for TV/movie piracy?• Is the rising popularity of streaming due to an increase in traffic from the casual, or naïve, pirates?• Are the committed pirates contributing to the popularity of web video?

The findings point to an overall growth in piracy due to increasing traffic to web video sites. Casual pirates are driving this growth while committed pirates retain their preference for P2P sites.1 Key findings include:

• P2P remains an important piracy platform while web video is adding to overall piracy.• In 2017, P2P trends in seven of the eight countries investigated are constant or increasing

indicating that while web video is growing P2P piracy has not declined.2 • Committed pirates, who prefer piracy to the wide range of legal services being offered, prefer

P2P as their platform for accessing content.• The users most likely to pirate via web video are casual pirates – i.e., they visit legal sites too.

• The P2P network plays a central role in distributing infringing content to the online piracy ecosystem. • The high-quality video content in greatest demand on piracy sites is first released on the P2P

network.• Web video sites source a significant proportion (28%) of the high-quality content they offer from

P2P sites.

1 Irdeto used a custom analysis of online panel data and Irdeto piracy data to look at nine months of piracy activity on P2P and web video sites for committed and casual pirates – i.e., those who visit only piracy sites and those who visit both piracy and legal sites.2 Germany is the exception. Beginning in 2007, online piracy was heavily influenced by a series of laws targeting P2P file sharing that (1) stipulates prison sentences for any user caught illegally downloading films or music, (2) stipulates heavy fines for illegal file sharing and (3) allows rights holders to sue individual users.

3

INTRODUCTION: AN EVOLVING ONLINE LANDSCAPERecent growth in the piracy landscape can be traced to changes in technology that also explain growth in the legitimate media and entertainment landscape. Users can choose from a wide range of devices to stream movies and TV shows, from their desktop computers and smart TVs to their smart phones, laptops and tablets. The overall online landscape has evolved as follows:

• As broadband services became widely available, users looked to the internet to stream content. The number of global broadband subscribers grew by 2% in the last quarter of 2017. On average, 20M subscribers were added quarterly in 2017.

• Mobile devices overtook desktop computers in 2017 to dominate global share of internet use, accounting for 71%.3

3 https://www.recode.net/2017/5/30/15712660/media-consumption-zenith-mobile-internet-tv All Zenith charts presented here are from this article.

4

• In 2010, the average individual spent much less time on the internet each day (48 minutes) than the time spent watching TV (188 minutes). By 2017, that gap had narrowed considerably from 140 minutes to 30 minutes.

As the average user considers the many available sites for accessing content on the internet, they find legal sites, illegal sites and illegal sites masquerading as legal sites. Users rely on the internet as the portal to content and many are compelled by low subscription rates or free access to join pirate sites offering a wide range of infringing TV and movie content.

At the same time, the average user is unlikely to understand the risks associated with clicking on links or downloading content from an illegal site. A 2017 survey of US internet users conducted by the Pew Research Center identified the gaps in knowledge that characterize respondents’ understanding of cybersecurity issues.4 Key findings of this study include:

• Ransomware: While 48% of respondents correctly identified ransomware, 43% of respondents answered “Not Sure”.

• Botnets: 73% of respondents answered “Not Sure” when asked if a botnet is a set of computers used for criminal purposes.

• VPNs: 70% responded “Not Sure” when asked if a VPN minimizes the risk of using insecure Wi-Fi networks.

The interaction between naïve users and savvy piracy site operators creates a false sense of credibility in the online piracy ecosystem, where piracy sites charge for easy access to a wide range of infringing content that they acquired at no cost. The ecosystem also relies on committed pirates – i.e., users who know the sites are illegal, understand the risks and yet prefer to access their content exclusively at illegal sites.

4 Pew Research Center, March 2017, “What the Public Knows About Cybersecurity”

5

As online piracy keeps pace with advances in technology, web video sites have been rising in popularity and, in some high piracy countries, drawing more traffic than P2P sites. This report examines these trends in the current piracy landscape to answer the questions:

• Are web video sites replacing P2P sites as the primary platform for TV/movie piracy?• Is the rising popularity of streaming due to an increase in traffic from the casual, or naïve, pirates? • Are the committed pirates contributing to the popularity of web video?

6

DEMAND FOR HIGH QUALITY VIDEO DRIVES P2P PIRACYThe peer-to-peer sharing protocol, used to simultaneously distribute large files to a large number of users, provided the primary means for distributing pirated content online in the early days of the internet, when average bandwidth wasn’t sufficient to stream video files. As bandwidth increased, a greater variety of options were made available to users looking for movies and/or TV programs online, including sites streaming video on demand (VOD). 5 In many countries, the only available bandwidth options are insufficient to stream video and users are limited to downloading video files for viewing locally. In these countries, web video sites don’t provide a practical alternative to P2P piracy.

An analysis of P2P trends confirms the continuing importance of the torrent network in distributing pirated content online. In 2017, monthly downloads totaled 800M or higher worldwide each month excepting April (791M). For all movie and TV programming, P2P pirates downloaded 10 billion files. Additional findings were:

• TV downloads accounted for 479M monthly, totaling nearly 6B downloads from January through December.6

• Movie downloads accounted for 381M monthly on average, totaling 4.6B downloads.

• On average, the United States accounts for 11% of global downloads. The US percentage of TV downloads (13%) is somewhat higher than that for movies (9%).

• Russian users account for 12% of global downloads in 2017, including a 5% share of TV downloads and a 19% share of movie downloads.

Demand for high quality video content drives P2P piracy. The highest quality video files available on the P2P network are sourced from either Blu-ray or early release VOD. Blu-ray files account for 383M downloads by Russian users, 180M by US users, and 184M by Brazilian users.

5 Note that the P2P network can be used by web video sites that don’t offer users a downloading option. Web video sites may choose to use peer casting to share one stream with many users. See https://en.wikipedia.org/wiki/Peer-to-Peer_Assisted_Streaming_Solution6 P2P trends summarize data collected by Irdeto’s P2P Business Intelligence System. The system monitors global P2P activity for over 400 popular movie and TV titles. Irdeto’s monitoring tools capture activity representing 80% of the P2P universe.

7

Global P2P Piracy: Blu-ray

Early digital releases target markets where a large number of customers prefer VOD to the theater experience, notably Korea and China. These high-quality files draw pirating users in large numbers, though the numbers are not as large as the Blu-ray files. Russia ranked highest (62.5M) for

Global P2P Piracy: Early Release Video on Demand - Korea

2017 Korean early release VOD content, while Korea ranked second (32.5M) and the US ranked third (30M). Russia and the US ranked first and second for P2P downloads of Chinese early release VOD content, with 3.4M and 1.9M downloads respectively. China (1.3M) ranked fourth after Brazil (1.6M).

8

Global P2P Piracy: Early Release Video on Demand - China

9

WEB VIDEO’S CONTRIBUTION TO PIRACYThe overall nine-month trend for high piracy countries in 2017 indicates that P2P traffic is significantly higher than web video when no distinctions are drawn by country. From January through September 2017, visits to P2P sites accounted for 70% of global activity for both platforms.7

Looking at country specific trends, it becomes clear that P2P is popular enough in several countries with very high levels of piracy to ensure its dominance on a global scale.

Those countries where P2P traffic is significantly higher than web video traffic either have a piracy culture dating to the early days of online piracy where Bittorrent was the only option (Russia & Netherlands), or have insufficient bandwidth for a seamless streaming experience (India & Brazil). Russian users visit P2P sites exclusively, with less than 5% of visits made to web video sites in any one of the nine months. P2P dominance is less pronounced in the Netherlands at 60% of combined piracy activity. Visits to P2P sites in Brazil and India account for a large proportion of piracy activity, 75% and 60% respectively.

At the same time, trends in legitimate online services suggest that there are limits to how far the preference for streaming will spread. For example, in 2016 Netflix recognized country-specific preferences for downloading content when rolling out a download feature that allows users to view content offline. Reed Hastings, CEO of Netflix, presented the feature as an alternative to “…the beauty and simplicity of streaming.” He explained, “…as we expand around the world, where we see an uneven set of networks, it’s something we should keep an open mind about.”8 7 Based on a custom analysis of online panel data on visits to P2P and web video sites for users in 19 high piracy countries listed in the appendix.8 https://www.sandvine.com/blog/netflix-download-service-what-it-means-for-consumers-and-broadband-operators-and-how-netflix-can-help-operators

10

In countries where web video traffic is growing and looks to be higher than P2P, the trend can be explained by a piracy culture fueled by high bandwidth and the seamless viewing experience at web video sites (conditions common to all four countries featured in the charts below). US traffic to web video sites grew from 57% of combined traffic in January to 67% in September 2017. For the other three countries (UK, Germany and France), government policy aimed at fighting P2P piracy has also played an important role.

• The UK has implemented an extensive site blocking program beginning with The Pirate Bay in May 2012.9 In 2017, The UK Digital Economy Act increased the maximum jail term for illegal file sharing from two to ten years.10 The government also chose to pursue a number of high profile cases against individuals selling KODI set-top boxes pre-loaded for access to pirated streams.11

9 Danaher, Brett, Michael D. Smith, Rahul Telang. 2015. The Effect of Piracy Website Blocking on Consumer Behavior. (http://ssrn.com/abstract=2612063). An econometric analysis found that blocking only The Pirate Bay cause no increase in10 https://www.express.co.uk/life-style/science-technology/799844/Kodi-Box-digital-economy-act-prison-streaming-torrents11 https://www.birminghammail.co.uk/news/midlands-news/law-kodi-v18-streaming-illegal-12491422

11

• Beginning in 2007, German online piracy was heavily influenced by a series of laws targeting P2P file sharing that (1) stipulated prison sentences for any user caught illegally downloading films or music,12 (2) stipulated heavy fines for illegal file sharing and (3) allowed rights holders to sue individual users. As a result, German users have opted for web video sites.13

• In France, early anti-piracy law (2009) focused on notice sending for P2P file sharing and allowed for both fines and suspension of internet service for repeat infringers. Revisions to the law left notice sending and fines in place but eliminated the suspension of service penalty. The law also included an ongoing educational mandate, to inform French citizens of the illegality of sharing copy-righted materials online.14

12 https://torrentfreak.com/two-years-in-prison-for-downloading-a-movie/ A prison sentence of two years was stipulated for illegally downloading for personal use, with heavier sentences recommended when downloading for commercial use. 13 http://www.dw.com/en/internet-pirates-walk-a-fine-line-in-germany/a-36364095 German law declares duplicating a video file is illegal but viewing a pirated movie without storing it on a computer is not.14 Danaher, Brett, Michael D. Smith, Rahul Telang, Siwen Chen. 2014. The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France. Journal of Industrial Economics. 62(3) p. 543. The awareness created by the first educational campaign was effective in reducing the number of illegal music downloads by French users.

12

THE CONTRIBUTIONS OF COMMITTED AND CASUAL PIRATESTo better understand the choices users make when selecting a piracy platform for viewing content, Irdeto used a custom analysis of online panel data to evaluate nine months of piracy activity for two types of users in the high piracy countries: committed and casual pirates.15 Users were assigned to one of the two groups based on their online activity in January 2017. Those who visited only pirate sites in January were flagged as committed pirates. Those who visited both pirate and legal sites were flagged as casual pirates. The analysis summarized each group’s visits to P2P and web video sites from January through September 2017. Key findings include:

• Committed pirates in high piracy countries visited P2P sites more often than web video sites.• Committed pirates rarely visit legal sites and are more likely to use P2P.• Casual pirates, who typically access their content at both legal and pirate sites, prefer web video.

To this point, we’ve seen that both P2P and web video sites are popular among pirating users. This naturally leads to the question: given the ease of access to content via web video sites, is web video evolving as a replacement for P2P? If this were the case, we would expect to see the trend for P2P declining over time in those countries where web video is popular.

The available evidence tells a different story for 2017: web video is adding to overall piracy. P2P remains an important piracy platform while web video is growing in importance.

• If web video were replacing P2P, then P2P trends would be declining. • But P2P trends in 7 of the 8 countries are constant or increasing in 2017, indicating that web video

is growing while P2P piracy persists.16 • Germany is the one case where the P2P trend is declining due in large part to the strict laws

discouraging P2P piracy.

15 The 19 high piracy countries included in this analysis ranked highest on P2P downloads in the three months preceding the analysis period, from October – December 2016. See Appendix.16 The logarithmic trends shown here serve two purposes: (1) the scale of piracy for any one country does not dominate the y axis and (2) the log scale “smooths out” the considerable fluctuations in P2P piracy from month to month.

13

The complementary relationship between P2P and web video piracy can be explained by the structure of the online piracy distribution network with respect to high quality content. Most often, the P2P network introduces content to the broader piracy network. A video file is first released by a release group on a private P2P site and from there is distributed to host sites, including P2P and web video sites. Operators at public piracy sites look to the private P2P Sites for high quality content to share with users.

The available evidence points to the importance of the P2P network in distributing large video files to a large number of users. In 2017, the top 25 release groups released more than 773,000 files to the network.17 Those files were picked up by the P2P “top sites”, responsible for making the releases public. The top 29 P2P “top sites” logged 86M visits. Web video sites picked up 28% of the files offered on their sites from the P2P network, relying on the P2P sites for high quality video content.18 17 Based on releases as reported on the site predb.me.18 This is a conservative estimate of web video content sourced from the torrent network. The analysis compared filenames looking for an exact match. When files are copied or uploaded, filenames often change. P2P data includes a filename for every download but not all filenames are listed on web video sites.

14

RESULTSIn summary, the findings point to overall growth in piracy due to increasing traffic to web video sites.

• P2P remains an important piracy platform while web video is growing in importance.• In 2017, P2P trends in six of the eight countries investigated are constant or increasing,

indicating that web video is growing while P2P piracy persists.• Committed pirates, who prefer piracy to the wide range of legal services being offered, prefer

P2P as their platform for accessing content.• The users most likely to pirate via web video are casual pirates – i.e., they visit legal sites too.

• The P2P network plays a central role in distributing infringing content to the online piracy ecosystem. • The high-quality video content in greatest demand on piracy sites is first released on the P2P

network.• Web video sites source a significant proportion (28%) of the high-quality content they offer from

P2P sites.

15

APPENDIX: CUSTOM DATA ANALYSISHigh piracy countries were selected based on P2P activity from October – December 2016. This table presents total desktop visits to 962 piracy sites for the 19 countries ranking highest in P2P downloads:19

All users who visited at least one piracy site in January 2017 were assigned to one of two groups:• Committed pirates: those who visited only piracy sites that month, and • Casual pirates: those who visited both piracy and legal sites.

19 Data provided by Web Analytics partner. Visits are actual desktop visits by online panel members to 962 piracy sites, of which 859 were either P2P or web video sites. Our partner did not weight visits to represent the global or national online population. This analysis excluded 103 live streaming sites from the visits comparison because the type of content is fundamentally different from what’s viewed on P2P and web video sites. Live streaming visits were included when identifying a user’s casual or committed status.

16

The custom analysis identified all users from the 19 “High Piracy” countries who participated in the online panel in January 2017.

The online panel was divided in to two groups based on a user’s activity in January 2017:

• Casual pirates, who visited both legal & piracy sites• Committed pirates, who visited only piracy sites

Users’ daily online activity was tracked for each group for the next nine months, through September 2017.20

• Users in both groups visited both P2P and web video sites.• Other activity tracked included visits to live streaming and hybrid sites, as well as visits to some legal

sites.

20 Our Web Analytics partner provided Irdeto with summary tables by user group. No data was provided that would allow Irdeto to identify individual users.

17

w w w . i r d e t o . c o m

© 2018 I rdeto. A l l R ights Reserved.