Follow the money to fight online piracy

Update: 4 July, 19:00 CET. Minor amendments in paragraphs 6 and 10 to more accurately reflect the report and other sources.

Until now, most debate about online piracy is driven by emotion, not hard data. In an attempt to fill this gap, we teamed up with the UK copyright collective PRS for Music and asked BAE Systems Detica to take a detailed look. Their report was published today.

Detica examined hundreds of websites cited by rightsholders as the main online pirates. For each, it analysed - amongst other things - the number of unique visitors, IP addresses, the main sources of funding, and preferred audio-visual formats. The results suggest that the most effective weapon to tackle piracy is to follow the money - to squeeze the pirates’ financing.



The report details intriguing trends. Sites selling unlicensed music tend to have low and declining volumes of users, suggesting that the ease of buying legal copyrighted music is having an impact on piracy. In contrast, sites streaming free live TV account for a third of all sites and are increasing in number the fastest.

How best to combat this danger? Instead of imposing blocks or filters that might damage fundamental freedoms, governments should construct coalitions with reputable advertising networks, payment processors and rightsholders. Together, these coalitions can crack down and squeeze the financing behind online infringement.

A close look at pirate financing shows why following the money could be so effective. Some 86% of advertising on the pirate sites surveyed by Detica comes from networks that have failed to sign up with the UK’s self-regulatory bodies or commit to strong codes of conduct. More than two thirds of the sites that rely on subscriptions or payments display well-known credit card logos. Online advertising networks, credit card and online payment facilities should be encouraged to sign up to self-regulatory codes of conduct that help cut off the pirates' oxygen supply - financing

The UK Government is moving in this direction. It encourages advertising networks, payment processors, rightsholders, and the police to collaborate and squeeze pirate financing. And the research shows that the UK no longer is an attractive home for pirates.

Here’s the real good news: the UK is becoming an attractive place for legitimate online content businesses. According to the BPI, digital music counted for 55.5% of record industry revenues in the first quarter of the year. Advertising-supported music services grew year on year by 23.6% to £86.5m.

Paid-for subscription services are booming. Their income almost doubled year-on-year to just under £9 million. Advertising-supported digital services such as Spotify and We7 raked in revenues of £3.4m, an increase of 20% on Q1 2011.

The upshot? Even though revenue from compact discs fell, the music industry’s overall market value grew by 2.7% to £155.8m.

Now that’s one nice tune.

Posted by Theo Bertram, policy manager, UK