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Netflix, Amazon And Hulu Are Paying A Steep Price To Battle Piracy

This article is more than 6 years old.

Streaming services such as Netflix, Amazon and Hulu are winning the battle against pirates who aim to steal their content, according to a recent research report. Meanwhile, new features on social media such as YouTube Live are attracting hacked broadcasts of popular cable networks such as Nickelodeon and CNN.

According to U.K.-based Digital Television Research, revenue lost to theft of TV shows and moves is expected to hit $51.6 billion in 2022, nearly double its 2016 level of $26.7 billion. The news, however, isn't all bad since legitimate revenue from over-the-top (OTT) services overtook piracy revenue in 2013 and the gap between the two measures is widening. Digital Television's report covers 138 countries and excludes Pay TV and sports.

“Piracy will never be eradicated," said Simon Murray, Digital Television's Principal Analyst, in a press release. "However, it is not all bad news. Piracy growth rates will decelerate as more effective government action is taken and as the benefits of legal choices become more apparent."

Though TV piracy is a worldwide problem, it is the most prevalent in the U.S. According to Digital Television, U.S. piracy losses will reach $11.6 billion in 2022, up 30% from 2016. China's crackdown on piracy appears to be yielding some improvements though its 2022 losses are expected to climb from $5.5 billion to $9.8 billion during the same time period. The most populous country's gap between legitimate and pirated revenue will improve from a deficit of $1.2 billion in 2016 to a surplus of $2.4 billion in 2022.

Piracy in India and Brazil, however, is getting worse. According to Digital Television, India will see $3.1 billion in 2022 losses, the third worst on a global basis, from eighth in the 2016 rankings ($700 million losses). Brazil will add $1.1 billion in losses over the same period, hitting $2.58 billion in 2022.

Given the streaming media sector's explosive growth, the industry isn't making too much of a fuss about the widespread practice of users who borrow one another's passwords. A Reuters/Ipsos poll conducted in July found that 21% of streaming viewers aged 18 to 24 said they had accessed OTT services using credentials from someone from outside their household. The survey found that 12% of adults did the same thing.

In fact, Netflix recently reported blowout quarterly results, adding an eye-popping 880,000 domestic subscribers and 4.45 million international ones. Analysts such as research firm Second Measure aren't expecting Netflix's recent price increase to significantly slow consumer interest in the corporate home of Orange Is The New Black, at least for now. As Second Measure recently noted, Netflix's market domination remains formidable.

Hulu is Netflix’s nearest threat, but the race really isn’t very close. Currently in the United States, one in four people subscribe to Netflix, while only one in 14 is a Hulu subscriber. Sling TV is a distant third in the video-streaming market, with about 1% of the U.S. population subscribing. And other live-streaming services like CBS All Access and DirectTV Now have even fewer subscribers than that.

The piracy picture for television networks isn't so clear-cut.  According to an April Ad Age story, consumers are watching pirated streams of popular channels such as Time Warner's CNN and Viacom's Nickelodeon over YouTube. Though analysts have said the pirates account for a small portion of overall television viewership, television networks are scrambling to retain their audiences as they facing growing competition from streaming services that are proving to be popular with cord-cutters who have quit cable and satellite TV service.