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Showstealers

TV wakes up to the threat of online piracy 1/09/2005 07:00:00 PM Eastern

Eric Garland got home too late to catch a new episode of ER recently, but his trusty TiVo had recorded the show. Or so Garland thought. Midway through the episode, his TV screen turned to snow. Garland’s digital cable service had gone down earlier and ruined the rest of the recording.

“Without even thinking twice about it,” Garland says, he headed straight for his computer, downloaded a pirated file of the ER episode and finished watching it. Garland has a certain expertise when it comes to finding online files of TV content: He is the CEO of BigChampagne, the Beverly Hills, Calif.-based company that has become known as the Nielsen of Internet file-sharing measurement.

Top 10 Pirated TV shows in the U.S.
File sharers are big fans of SpongeBob and Will & Grace
Program Files*
* Average number of simultaneous files at any given moment on peer-to-peer networks, for the week ended Dec. 7, 2004
SOURCE: BigChampagne

SpongeBob SquarePants
374,555

Will & Grace
318,997

The O.C.
240,525

Friends
222,671

Survivor
222,404

American Idol
204,298

Family Guy
196,330

Futurama
137,440

Seinfeld
121,520

The Simpsons
118,769

“I had no qualms,” Garland says, because in an age of instant media gratification, “if you’re not giving me what I want when I want, we’re becoming conditioned to seeking alternatives and taking matters into our own hands.”

Garland and the hundreds of thousands of file-swappers like him may be impatient about traditional means of television distribution, but that is nothing compared to the urgency the industry feels about the incipient Napsterization of TV content. Alarmed that downloading content has the potential to damage everything from the booming market for DVDs of TV shows (Merrill Lynch pegs sales for 2004 at $2.3 billion) to the all-important TV schedule itself, television executives are racing to address a problem that barely existed 18 months ago.

To thwart this threat, the industry has launched a multifaceted offensive, enlisting the help of the FCC; hiring lawyers to pursue file-swappers in court; employing security firms to throw a monkey wrench into the downloading process; and—in what may become the ultimate revenge—scrambling to develop their own iTunes-inspired content-downloading services.

SpongeBob Rules

“Stealing and making multiple copies of copyrighted material is a crime,” says Rick Cotton, executive vice president and general counsel of NBC Universal, repeating the mantra of the entertainment business. “The experience of the music industry shows us all the dangers of not paying adequate attention to this.” Recent numbers from BigChampagne certainly would get NBC’s attention: For the week ended Dec. 7, the network’s Will & Grace was the No. 2 TV show available for peer-to-peer downloading in the U.S., with 318,997 files up for grabs online. (Nickelodeon’s SpongeBob SquarePants was tops, clocking in at 374,555.)

The Swarm

Movie and television companies were insulated from the initial file-sharing explosion in the 1990s, when narrowband America first discovered that digital song files could be swapped fairly easily over dial-up modems. Sending info-heavy movie or TV files through the skinny pipes was beyond impractical. But with the spread of broadband connections capable of carrying much more information—fully half of the online households in the U.S. now have high-speed connections—shipping movie and TV content over the Internet became more convenient.

The real breakthrough came a couple of years ago with the introduction of a radical twist on file-sharing, called BitTorrent. The software turns file distribution into a piecemeal “swarming” activity, breaking files into parts so that multiple users are simultaneously downloading file parts while uploading others that they’ve already acquired. The result is that large files can be acquired with relative ease: Variables including video quality and available bandwidth affect the speed, but, generally speaking, if you want to acquire the entire first season of The Sopranos without paying $75 and you know where to find such BitTorrent listings, click on the program after dinner, and you’ll have it by breakfast. The Motion Picture Association of America (MPAA) announced last month that it is suing more than 100 people who operate BitTorrent servers to facilitate swarming.

File-sharing “is a very big issue for us,” says Bob Zitter, chief technology officer at HBO. The loss of potential home-video sales is important, he says, but even more worrisome is the threat to HBO’s subscriber base. “If we don’t have some form of security,” he says, “we won’t have any business.”

Broadcasters echo HBO’s concerns, seeing illegal file-sharing of TV content as a menace to their business models as well. They’re especially worried about continual improvements in Internet technology in tandem with the spread of picture-perfect HDTV (there’s widespread disagreement about the general quality of most online files right now, but there is no doubting that it will only get better, with ever faster delivery). In addition to the threats to advertising, ratings and DVD sales, the worldwide reach of Internet TV piracy means that young shows that could use the kind of support offered by licensing in other markets might go begging, according to Jane Sunderland, vice president of content protection and anti-piracy for the Fox Entertainment Group. “Arrested Development got a lot of kudos, but it hasn’t been picked up in a lot of territories around the world. And yet you can find it on BitTorrent,” Sunderland says. In other words, thanks to file-sharing, Arrested Development may suffer arrested development.

Spoofing Tactics

Broadcast networks, cable channels, the studios that make up the MPAA, and others who try to make a buck from TV (and saw file-sharing kneecap the music industry) have been pouring resources into fighting piracy. The legal battle took an encouraging turn for content owners last month when the Supreme Court agreed to consider whether file-sharing services such as Grokster and StreamCast Networks’ Morpheus can be held responsible for illegal trading of copyrighted material using their software.

In the meantime, networks will continue harassing and frustrating downloaders by utilizing anti-piracy specialists such as Macrovision, MediaDefender, MediaSentry and Loudeye’s Overpeer. Such services saturate file-sharing sites with “spoof” files that appear to carry TV content but instead just send digital gibberish, TV promos or directions to a site where downloaders can legally buy DVDs of the show they’re after.

Loudeye Vice President and General Manager of Media Asset Protection Marc Morgenstern says that, while piracy of TV content “has just exploded,” he doesn’t predict legions of new file-swappers hunting for TV shows. The base of peer-to-peer network users “has stayed quite steady,” he says, at 9 million to 10 million. “But what has changed is that the user base is trading more files, has more powerful computers and more available bandwidth.”

“Internet Pinkertons”

Content businesses also hire companies such as BayTSP to detect individual file-sharers and then send the Digital Millennium Copyright Notice to the users’ Internet Service Provider, warning of the illegal activity. The ISPs caution the file-sharers to stop, and cancel their accounts if they continue. “Think of us as the Internet Pinkertons,” says CEO Mark Ishikawa, whose company sends out a million notifications per month for illegal music, movie and television downloading (BayTSP started monitoring for TV content only in the past year). Combating downloaders can be a maddening pursuit, however. Last summer, fans of The WB’s Summerland compared notes about finding “torrents” of the show—in a conversation conducted on The WB’s own Summerland message board.

But spoofing and cease-and-desist letter-writing are only finger-in-the-dike measures compared with the long-term solutions sought by the television industry. One strategy, called “plug-and-play,” is already in place, with satellite and cable companies bowing to Hollywood’s request to equip digital boxes with digital rights-management capabilities (that is, limiting the copying of programming). Another, called “broadcast flag,” is shorthand for an FCC rule that prohibits copying of terrestrial digital broadcasting. The rule, which takes effect in July, requires that all new digital recording devices made this summer would recognize broadcasters’ unique anti-pirating signals. The rule faces a legal challenge from the American Library Association, the Electronic Frontier Foundation (EFF) and other organizations, which say the FCC has overstepped its authority.

Enter the Darknets

Even though the EFF has joined the fight and deplores plug-and-play technology, staff attorney Fred von Lohmann sounds almost amused by Hollywood and the FCC’s attempts to control the distribution of TV content. “The cow is way out of the barn,” he says, pointing out that mountains of “legacy” TV and computer hardware already in use will continue to work perfectly well for years to come, immune to rules governing new electronics gear.

The very file-swappers the entertainment business is trying to thwart are often just the sort of tech-savvy iconoclasts who like nothing better than undressing digital security measures. (They also like to come up with digital ways to cloak their activities—as with a relatively new phenomenon called darknets; these are created by software that allows groups to congregate in a closed circle, chatting and freely sharing the music, photos, movies and TV shows on each other’s computers—far from the entertainment industry’s prying eyes.)

Mitch Singer, executive vice president of Sony Pictures Entertainment’s digital policy group, calls the plug-and-play and broadcast-flag technologies “speedbumps” that are intended mainly to “give consumers the appropriate boundaries.” Singer says: “We’ll never stamp out piracy, but I believe we can keep it to a manageable level.”

The music industry’s experience may be what spooks the movie and television businesses, but the parallels are less clear. Josh Bernoff, an analyst with Forrester Research, says file-sharing of TV content has limited appeal for most consumers because of the annoyance factor involved in downloading a file and then either having to watch the show on a computer screen or figure out the tricky business of burning a DVD so it can be watched on a TV set.

Moreover, illegal downloading “was a knife pointed at the heart of the music business,” he says, but varied revenue streams for movies and TV make them less vulnerable to piracy losses—if, Bernoff says, there are in fact any losses.

Todd Chanko, a digital television analyst at Jupiter Research, is similarly skeptical, calling TV-content downloaders “a tiny universe.” The bigger threat to the TV industry’s business model, say analysts, is the digital video recorder.

Converting Criminals into Customers

At a time when illegal downloading of TV content is still relatively new, networks likely have time to launch what could prove to be the most potent weapon of all: the video equivalent of Apple’s iTunes online music shop, offering affordable, convenient (and legal) downloads of their own programming. That goal is “a matter of very intent discussion at all of the content companies,” says NBC Universal’s Rick Cotton, who expects his company to have a content-downloading business running within a year’s time. At Sony Pictures Entertainment, says Mitch Singer, “we’re exploring all opportunities to deliver content over Internet Protocol.”

Liberty Media Corp.’s Starz Encore Group has jumped ahead of the pack with its new STARZ! Ticket on Real Movies. The pay-TV movie service gives online users instant access to 150 hit movies for $12.95 a month. The first time a movie is downloaded, the user receives three individual “24-hour viewing licenses.” Afterwards, the expired movie is removed automatically from the user’s hard drive. Another model: Movielink, a Hollywood-backed service for legal movie downloads that launched in 2002 but has yet to generate much buzz.

With the TV industry hoping to convert pirates and newcomers alike into paying customers, BigChampagne’s Garland says they’re on the right track. Many people are unaware that downloading movie and TV content is even possible. More online video will be bought—not shared—he says, “if Hollywood starts rolling out legitimate alternatives soon.”

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