A hacker who unsuccessfully tried to hold Netflix for ransom has achieved an unexpected result: His failure shows that subscription-based business models in content distribution is making piracy pointless.
Someone calling himself (or herself) TheDarkOverlord stole most of the new season of Netflix’s popular series, “Orange Is the New Black” and demanded ransom. Netflix refused to pay, and TheDarkOverlord put the stolen material on the Pirate Bay for anyone with a torrent client to download.
But it’s unlikely that others the hacker is threatening (Fox, National Geographic, ABC) will pay up, either. Nor will Netflix regret its decision: It’s safe to say that its bottom line won’t be affected; at most it will release the fifth season of “Orange” earlier than planned.
The reason can be found in networking-solutions provider Sandvine’s Global Internet Phenomena Report. Last year, BitTorrent traffic reached 1.73 percent of peak-period downstream traffic in North America. That’s down from the 60 percent share peer-to-peer file-sharing had in 2003.
File sharing is the only traffic component of Internet traffic that isn’t growing, and isn’t projected to grow, in absolute terms, according to Cisco Systems.
Netflix content has been pirated since it began producing its own shows, yet that’s never left a mark. It has the resources for legal fights, but really, who wants to go through the trouble of using torrents — and risk problems with one’s Internet provider, or with the law — to see a season a little earlier?
Certainly, no one will cancel Netflix because one series is suddenly available for free download with an inconvenient technology that doesn’t allow instant streaming. People would only consider that if all Netflix content could suddenly be streamed free of charge.
“Subscription” is the key word here: This business model is a piracy-killer.
For 15 years, Adobe Systems tried to sell its image-manipulation software for thousands of dollars a box to professional photographers and designers — and everyone I knew in that community used pirated copies at home. Now that the software is sold as a service, for a monthly fee, everyone I know pays more or less happily.
Richard Atkinson, Adobe’s global director of piracy conversion, notes that “various anti-piracy solutions over the past 15 years” proved “ineffective.” So the company opted “to make a fundamental change and begin thinking about piracy as a business problem.” Adobe managed to switch to the subscription model without losing revenue.
In the content industry, it’s been a scarier transition. Record companies lost massive amounts of money in the shift to streaming, not least because the music-streaming-industry pioneers initially gave a lot of music away for free, hoping to build ad-based business models.
Now that this illusion is gone, streaming revenue is quickly growing, and catalog owners and artists are more willing to cooperate with streaming services. That means more bands and songs on Spotify and Apple Music, and less piracy. According to Muso, the digital-content-protection firm, 2016 saw a 6 percent decline in visits to music piracy sites, including “stream ripping” services that offer illegal streaming.
Video piracy is slowly declining. Subscription services such as Netflix are driving it down by expanding user choice and producing their own content.
There will always be a few people who consume pirated content. But most consumers are motivated by convenience. Subscription services don’t cost much, and they’re easy and safe to use. Finding decent quality videos on piracy sites without watching invasive ads and running the risk of malware infection is a hopeless enterprise. If you’re like me, you’ll only do it extremely cautiously — and only if the content you want isn’t available from a legal service.
Therein lies a problem. When it comes to video, copyright owners are less willing to release new and in-demand content to subscription services. They’re eager to preserve theater revenues during a first run, and happier selling older films to Apple and Amazon which offer them on a pay-per-view basis.
Film studios are missing an opportunity. According to Muso, in 2016, there were 5.6 times as many visits to film piracy sites than to music piracy ones. Besides, there’s a major risk involved in the current movie-distribution model. If hackers had stolen a major release — say, the next “Pirates of the Caribbean” — the studio would be far more worried than Netflix is about the stolen season of “Orange.”
Eventually, movie studios and streaming services should work out a reasonable, perhaps tiered, subscription price system to make more content available online. It would drive down piracy, as the subscription model did in the software and music businesses, and it would make theft as nearly pointless as it has been in The DarkOverlord’s case.