Protecting Today’s Content, Tomorrow’s Future

Content Insider #749 – Piracy

“You know the feeling you get when standing in a high place, the sudden urge to jump…” – Jack Sparrow, “Pirates of the Caribbean: On Stranger Tides,” Disney, 2011

My wife loves it when we say we’re wrong.

We’re asked to repeat the words again … and again … and again …

So, we didn’t bother telling her that a year ago, we were strong supporters of the big studio bosses (Warner and Disney studios) moving their stuff – including tentpoles – to day/date or PVOD – paid release.

It seemed so logical, so obvious.

After all:

Zero, or nearly zero, theaters were open around the globe.
If any were open, films played to near empty houses.
Studios had sunk hundreds of millions into those projects and needed to monetize them.
Tech/content moguls were taking tens of thousands of entertainment-starved folks from the old TV bundle guys with new, refreshing stuff.
Studios make the video stories people want to watch, but they were just gathering dust.
Real entertainment folks could make millions, we tell you, millions.

We didn’t take into account that the bosses making those decisions got their experience running phone or amusement park companies.

Totally Different!

Stop the Switch – Theater owners, some A-list folks and “others” all agreed that a movie really isn’t a movie unless it is shown in a cinema and as long as possible. Others aren’t that particular.

Sometimes, “logic” doesn’t make sense.

But we were ready for first-run content at home:

We had upgraded to a large QLED screen with insanely great Dolby Atmos sound.
We didn’t have to dress up and get to the theater based on their scheduled airing.
We didn’t have to watch TV content based on some silly program schedule.
Our popcorn, concessions were better/cheaper.
We didn’t miss a moment of the action when we took a break.

If it was part of one of our subscription fees, great.

If the film was special and they wanted a few bucks more, that was okay.

Four of us watching for $20-$30 was still a great deal. A couple of times, the kids even had watch parties with friends.

Then theaters opened with a BAM! during the last three months of the year.

Ampere found the forced hibernation had rearranged everyone’s priorities.

Older age groups (24-45, 45 and older) were increasing their use of subscription services more rapidly than the 18-24-year-old group.

The younger crowd was flocking back to (discovering?) the movies

Half of the returned cinemagoers were under 35-years-of-age. Prior to 2020, Ampere reported they only accounted for a third of the movie house attendees.

If Bond’s No Time to Die was the project that drew people back into the seats, it’s pretty obvious it attracted a crowd that doesn’t know or care about the franchise’s 25-year heritage.

Racking up more than $500M, it’s pretty obvious that the younger crowd wanted to see what all of the fuss was about.

Of course, they really wanted to get out of the house, and a rich theatrical schedule was all the reason they needed.

Big Winners – To really open movie houses, studios and theater owners alike found that people liked good films no matter where they were made and who was in them. Disney racked up huge dollars with its Chinese tale, Shang-Chi and The Legend of the Ten Rings, while China rolled out its patriotic story, The Battle of Lake Changjin. Both put seats into seats.

Disney’s Shang-Chi and The Legend of the Ten Rings produced more than $500M in ticket sales, while China’s The Battle of Lake Changjin roared past $700M.

Even horror flicks like Halloween, Resident Evil and Nightmare Alley did well. And hero films like The King’s Man and Spider-Man with recent theatrical windows had good attendance records.

However, as our son pointed out, the big difference between the day/date projects and those with a reasonable theatrical window was that the immediate streamers had all been pirated. They all had free stuff – crappy gambling ads, malware and opportunities for system/identity theft.

The big difference was which ones got viewer attention.

Content that had day/date availability had plenty of downloads. Content was impressive … as good as if you paid to watch it.

The crappy spy camera stuff was free but … not many takers.

Suddenly we had a eureka moment!

Better Taste – If people are going to watch a pirated film, they want a good one that comes directly off the data stream, not a bad camera copy.

They may be sleezy (our opinion), but pirate viewers still know quality when they see it.

No true movie fan would admit to watching a low-quality cam movie from a pirate site as TorrentFreak’s data has confirmed.

Pirate viewers may be cheap, but they have taste.

Industry folks have said that early streaming (PVOD, day/date, 7 days) hurts ticket sales but they had a little wind taken out of their sales with Halloween Kills.

Jamie Lee Curtis showed up simultaneously in theaters and on Paramount+, totally ripped off Michael’s mask, did him in after 40 plus years and made theater owners/goers and streaming viewers happy.

Mom’s Mad – Perhaps it’s indicative of what we’ve been through, but horror flicks usually aren’t theater-packers. But that didn’t stop Universal’s Halloween Kills scare up lots of ticket sales, even as folks watched it at home.

Yes but…

It’s a rarity that horror flicks do well at the ticket booth or at home, so we’ll see if the joint Universal/Peacock appearance was a sign of people’s desperation to get outta the house or the wave of tomorrow.

There are about 200,000 screens worldwide with hundreds of new ones scheduled to open this year.

Even as they overbuild movie houses, NATO (North American Theater Owners) members have said the steady drop in ticket sales since 2002 is due to studios “cutting them out” by giving people a choice of going to the cinema or watching the stuff at home.

True, the big chains – AMC, Cinemark, Regal, Cineplex and others – still showed steady box office increases.

Pencil Pushing – By focusing on the big totals instead of the small ones, theater owners have shown steady box office increases while ticket sales have been off.

Of course, the average ticket price at chains, which account for 70 percent of the screens, climbed from $5.39 in 2000 to $9.16 in 2020. And yes, concession costs, including the cost of faux butter popcorn, increased even more.

As a result, theater CEOs rack up tens of millions in annual bonuses for making brilliant business decisions … raising prices.

The smaller cinemas, mom/pop and art house theaters occasionally get a tentpole film, but most eek out slim profits on the mid-range, specialty projects tailored to their regulars’ tastes.

“Everything sort of gets taken care of when you have the appropriate number of people,” a small-town theater owner along the Atlantic coast observed.

Struggle – Smaller mom and pop and art theaters don’t rack up huge profits, but they provide the kinds of films people want to go out and see along with sensible prices all around. Occasionally, they might even get a tentpole film to run for their audiences.

“I’m confident that if we’re supplied with movies, we’re going to be fine,” she added wistfully. “Movie theaters will be back.”

They are bouncing back and have their place in the entertainment spectrum because some projects are just too big, too dynamic to be fully appreciated even on a 55-in QLED screen.

The new wave of superhero/super villain works are okay at home; but for people who really want to appreciate the film, they must experience it on an ultra-large screen with controlled sound in a darkened room with near-perfect strangers.

How long should they be exclusively available in the theater?

The great (expensive) stuff should be in the movie house for 45 days so the diehard seat in seats folks have a chance to enjoy it, convince the occasional moviegoers to see it and immerse themselves a second time.

Not All Equal – With the growing availability of films of all types, not all will qualify (catch a big audience’s attention) or will interest theater chain owners; but today, there are many more options – pay TV and streaming. Some films are more suited for the home screen, even if they’re very good, even great.

Then there’s the really good stuff from studios/streamers that should be seen in the theater for about seven days to satisfy the movie house folks and long enough to qualify for Oscar consideration. Hey, we don’t make the outmoded rules.

Finally, there are the video stories that could go either way. People who want an evening out can enjoy it – and dinner out – in the theater. Folks who can tolerate their own popcorn will feel just as good grabbing it at home.

With the A-listers finally happy with their front-end payments and with the people who do the pre-production, production and post-production improving their life/work conditions, there are plenty of creative projects that need to be started/completed around the globe for all the outlets.

Everyone is happy except the pirate site viewers because they must tolerate gritty screen-grabbed copies in between the ads or wait until it’s streamed so they can “enjoy” a quality piece of entertainment and superb malware.

Or, they could decide cleaning the system after every viewing isn’t worth it and sign up with their fave streaming services.

“When a film is released simultaneously in a theater and streamed, a pristine copy is available almost immediately on the pirate sites around the globe,” said Allan McLennan, CEP/Media, Head of M&E North America, Atos. “When the investment is significant ($40M, if not more), and the project doesn’t have a realistic theatrical window, it is extremely challenging to produce a profit.”

McLennan pointed out that the streaming firms like Netflix, Amazon and Apple operate under a different set of guidelines and goals. Studio streamers have adopted a similar approach for the work destined to go directly to the home subscriber.

“Top-tier OTT providers have been focused on economically maintaining an almost assembly line of ‘engaged’ or must-see video stories that maintain and expand subscriptions,” he noted. “While Disney and Warner experimented during their early stages, they have made amends with almost everyone in the production pipeline, and most are happy, or at least agreeable, with the new ground rules.”

Expensive Viewing – Global pirated movies and TV shows cost studios, pay TV and streaming firms billions every year in addition to opening up people who watch them to malware and identify theft. With the growth of streaming services, the problem continues to increase.

McLennan emphasized that the changes in the project production cycle still doesn’t answer the pirate issue, which affects every segment of the industry and continues to grow.

Some marketing “educators” (https://tinyurl.com/7rvn6adc ) like to claim that pirate views are good for the video project and outlet because they provide valuable WOM (word of mouth) advertising that attracts more viewers/subscribers.

Streaming executives have echoed the enhanced WOM comment to illustrate how the services’ new projects and library are increasingly important to home viewers, thus making the projects and service more valuable.

FYI, pirating shows/movies is illegal … but a helluva profitable business if you’re willing to work in the shadows.

Not Marketing Expense – Some folks like to rationalize that people who watch pirated films/shows are really “spreading the word” so more folks will tune in to pay and watch the project. It isn’t. It costs studios, production teams and consumers … a lot!

According to the Digital Citizens Alliance, there are at least 84,000 pirate entertainment sites that make great money stealing/selling credentials/identities, stuffing ads onto your system/screen and costing regular visitors more than they can imagine. Stolen content providers reaped more than $30B this year from advertisers.

Unfortunately, most of the stuff they steal for people to watch didn’t come from some extremely wealthy monolithic corporation.

Instead, it came from individuals’ sweat, sacrifice and desire to share a video story with people everywhere.

Stories to be Told – Films like director Barry Jenkins’ Underground Railroad need to be created to help people everywhere understand their past, present and future. Many indie films are produced because people want to tell the story and are financed by friends, family and their own bank account. Not paying to view is theft.

Because of the significant outflow of outstanding content and the confusing array of streaming options, people are becoming overwhelmed with the studio/streamer-rated viewing options.

Depending upon the household, people have a smart TV with software access to streaming services, connected devices (Roku, Apple TV, Fire TV), cord stack (streaming + cable TV) and direct access to three – six streaming services.

However, the rich array of services has also been a competing offering of exclusive content and original programming.

A Verizon study mid-year found that 56 percent of the respondents were overwhelmed by the number of streaming services available.

Big Profits – It requires very little time and effort to grab an unsecured digital copy of a film/show and then show it free on pirate sites that get paid for the ads they run, so it can be very profitable.

With a single portal to a broad range of content, pirates have enjoyed a windfall of traffic–and profits.

Studios have provided pirates with the keys to vaults stuffed with money.

“With the rapid introduction of big-budget, blockbuster films to the individual streaming services, the piracy rate became staggering and predictable,” McLennan said.

“It will take some time – if ever – for the streaming industry to develop a broad genre, personalized and secure entertainment solution. Until then, individual organizations and the industry have to address the growing issue with a dual-pronged approach – enhanced content protection and consumer-focused education.”

The first move to make is to aggressively and consistently cut off the supply of content to pirates.

Content creators have already developed thorough protection in their production chain while adopting a ‘zero trust’ position.

Now it needs to extend to viewer delivery.

Forensic watermarking, multi-DRM and anti-piracy solutions available from firms such as Irdeto, Synamedia, Omdia, Vitrium and NAGRA are all essential to increasing the security of digital cinema virtual screening packages and premium VOD and SVOD content.

Forensic watermarking identifies the source of a content leak quickly and efficiently so effective anti-piracy action can be taken.

At the same time, a multi-DRM solution delivers content protection by leveraging both platform DRM and advanced features to maximize service reach and achieve operational efficiency.

McLennan noted that the combination is a sound starting point to protect against service, content piracy.

He added that by layering on anti-piracy services such as monitoring, IP-blocking and data-driven security analytics; studios and content providers can effectively take on the pirates.

Popularity Costs – While studios and tech firms continually focus on making digitally created/streamed content is as secure as possible for consumers, pirates work just as hard to break through and grab quality copies for their resale. Having millions of people watch the stuff you pay for is not good because it impacts future project investments.

At the same time, streaming services like to make it easy for present and new subscribers to access/view content without complex installations and ultra-complex authentication and encryption.

Leichtman Research Group reported that 69 percent of SVOD services are fully paid for and not shared with others outside the household. Twenty-seven percent of the services are used in more than one household while 31 percent are shared with someone outside the household or shared by multiple households.

McLennan estimates that this password sharing has cost Netflix billions annually in lost revenue.

To address the growing/costly trend, Netflix has taken a soft-handed approach.

Password Sharing – All of the streaming services are trying to discourage subscribers from sharing their passwords while encouraging the borrowers to pay their fair share. Increasingly, the soft touch will win people over … we hope.

“We know from the black eye the music industry got when it went after individuals in the courts,” McLennan continued. “In many ways, it does more harm than good. It’s much more effective to educate the consumer on the benefits of a fairly obtained ‘legal’ copy and converting to the subscription service.”

Netflix and other streaming services’ attention to this area still enables household members to share passwords to access entertainment on a variety of devices but they’re still focused on reducing unauthorized access to content.

Studios, content owners and streaming services increasingly invest billions each year to develop new, fresh content in addition to making older shows available.

To protect their IPS and enable them to invest more in tomorrow’s entertainment, the industry needs to continue to minimize credential abuse while continuing to make it difficult and uncomfortable for pirates to profit from the industry’s creative work.

Jack Sparrow might have even convinced himself in Pirates of the Caribbean: On Stranger Tides, when he stepped aboard the frigate and said “I thought I should give you fair warning, we’re taking the ship. Nothing personal.”

But it IS personal … very personal to tens of thousands of creative folks in the M&E industry who produce the stuff for people to visually/aurally consume.

Andy Marken – andy@markencom.com – is an author of more than 700 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software, and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media, and industry analysts/consultants.