In this article we step into the world of digital piracy, revealing some of the collateral phenomena which goes far beyond the obvious direct economic losses inflicted by access to content and products outside of the authorized distribution channels.
Awareness of what digital piracy entails
It seems like a no-brainer. However, it is one of those obvious things that not all of us comprehend in the same way. In fact, it is quite common that only the rightsholders, those who have some form of investment, be it small or large, in terms of intellectual property rights, that are fully aware of everything that digital piracy entails. The users who access, free events or VOD offered by piracy, either on a casual or regular basis, is largely unrelated to what is really occurring behind the scenes. It is not in the spirit of this article to scare the audience, but rather to raise awareness for the end user.
It is also clear that those who are behind digital piracy are entirely aware that they carry out a series of activities that, both in international legislation and in most national legislation, are classified as crimes or illegal acts, so it is not unreasonable to conclude that the development of these activities is conducted by pirates, with complete disregard to any regulations, such as the privacy of personal data or computer security.
We go on to list a handful of these collateral phenomena of piracy beyond the obvious direct economic losses due to access to content and products outside of authorized distribution channels.
Distribution of malware PUPs*
A recent study carried out by the EUIPO in cooperation with the European Cybercrime Center published the results of an investigation carried out on a series of potentially infringing pages in the field of intellectual property in relation to the distribution of both malware and those programs not required by users. Whilst they do not pose an immediate or direct threat to the security of users’ computers, they can be used, through various techniques, to collect sensitive personal information, even obtaining credit card data and other means of payment. In most cases, this software is downloaded without the user’s knowledge or consent.
The study shows that between 7% and 9% of the analyzed pages are dedicated to the distribution of this type of software, with those dedicated to online viewing of content (streaming) occupying third place, and finally, those dedicated to software “utilities” and fake game installers.
In the breakdown by type of downloaded items, almost 40% of the analyzed software corresponds to PUPs. In almost 45% of the cases this software contains malware, either in its pure state or mixed with PUPs.
*PUPs – Potentially Unwanted Programs
Digital advertising as a source of financing for piracy
As we have already mentioned in a previous article, digital advertising is by far the largest source of financing for piracy. In 2017, The Trustworthy Accountability Group (TAG) measured, through an investigation by Ernst & Young, the ad spend on pirated sites in the United States digital advertising market. In this sense, two readings can be made: the first, and perhaps the naivest, is that it is a small percentage of the total investment. This is factually correct. However, in a second reading, and considering the net data, we are talking about 111 million dollars of this ecosystem, which was spent in a single year, to finance piracy. Of this amount, $36 million came from Premium brands.
It has been a few years since this study, but the data still indicates high piracy ad spend. At the European level, by making a simple account of the main domains dedicated to content piracy by level of traffic and unique users and taking as a starting point a conservative CPM of between €0.5 and €1, we would have a profit for income advertising of approximately 10-20 million euros.
We are only talking about the main pages of the region in a single vertical, but, if we add the longtail to this calculation, it is entirely plausible that this figure exceeds several hundred million euros per year.
Not only does piracy take advantage of the great benefits and high productivity that digital advertising, and especially programmatic advertising, allows, but it also exploits its vulnerabilities. As previously mentioned, once the administrators of pirated pages base their economic activity on something, in which they are perfectly aware of its illegality, it usually leads to an expansion of the spectrum of activities to others that also infringe other rights.
In this case, one of the most recurrent actions within the advertising fraud associated with piracy, is the masking of the main domain by totally legal ones, normally of the premium category. With this, they not only manage to hide the identity of the pirate site, but also capture a high volume of advertising impressions from leading brands that, due to the impossibility of controlling said inventories, end up spending millions of dollars in financing piracy.
The IAB has made, and is making, constant efforts to prevent this and other forms of fraud. Among other initiatives they have led one to standardize and evangelize a type of file, called ads.txt. This regularizes and exposes the authorized digital sellers of each page to control and arbitrate the inventory of a certain information society service, thus reducing the possibility of domain forgery. A few years after its launch, the phenomenon of domain spoofing continues to occur.
The damage caused by digital piracy, in all its formats, is not only limited to the purely economic sphere. It also has a direct impact, albeit less easy to quantify, on how users perceive the value of the brand.
When companies do not have full control at any stage of the supply chain, for example in the case of counterfeit products both in marketplaces and rogue sites, or unsafe environments in the field of digital advertising, for example, in sites that distribute malware or mix the offer of content with distribution (also unauthorized) of pornography; the reputational damage for the brand in question is significant, especially when taking into account the cost and effort of building consumer trust and brand reputation.
Appearance of legality
Internet pages that infringe intellectual property rights, at the level of appearance and response at the user level, are usually comparable to legal businesses. In fact, they imitate them. Many of them have designed user interfaces that appear to provide the same offering, the same services, and incentives to clients as their legal services counterparts.
Of the 1,113,619 .es domain names that were analyzed in the Research on Online Business Models that Violate Intellectual Property Rights, a total of 49,147 electronic stores were detected. Of these, 9.1% were suspected of marketing infringing products and, finally, 81% were connected to a domain name that had previously been used for a different purpose (used by famous people, organizations, companies commercials, etc.) of the current electronic store. This is to ensure that the domains have an organic positioning due to their history to take advantage of it.
Is this scenario unique to Spain? Well, in this case sadly not: in Sweden, the percentage is 77.3%, in Germany 80.2%, and in the United Kingdom 71.1%.
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