CXO Matters | How Digital Piracy Is Creating a Dent in OTT’s Revenue
Media & Entertainment

How Digital Piracy Is Creating a Dent in OTT’s Revenue

How Digital Piracy Is Creating a Dent in OTT’s Revenue
Image Courtesy: Unsplash
Written by Abhishek Pattanaik

After Netflix successfully navigated the dot com crash of the late 1990s, it started to consider supplying a webpage with a consolidated version of all its content. Along with other streaming channels, it came with the promise of simplifying the entertainment landscape. Shifting across multiple channels across different networks was over because streaming them in a single place would become an option.

Less than two decades later, subscription-based content services have become similar to the old school networks they promised to replace. As a result, there has been a resurgence of digital piracy which has generated revenue leakages for many OTT platforms.

Let’s understand the entire process behind digital piracy

Knowing the reasons behind piracy and the revenue loss it generates will help devise ways to tackle the issue.

What Qualifies as Digital Piracy

Illegal distribution, copying, and utilization of copyrighted materials in a digital format is committing digital piracy. It is not simply theft of digital media but accessing and downloading it from a torrent is also classified as an illegal act under US law. That means websites that are simply streaming the content will be complicit in the crime as it will fall under distribution. Overall, it has an adverse effect on the economy.

Why Piracy is Prevalent

Piracy used to be limited to physical DVDs and CDs but with the advent of the digital age, it has skyrocketed. From the consumers side, initially there were issues such as malware or poor video quality. In the present day, users can find high quality pirated content with ease. Along with this, consumers are experiencing exhaustion from subscribing to multiple services. Platforms like Netflix further cracking down on password sharing and increasing adverts while raising prices does not present a good foot to stand on.

The Cost of Digital Piracy

The US and India are two of the largest markets for digital piracy by numbers. In terms of revenue loss, according to a Bloomberg report, the US economy loses an estimated $30 Billion annually. The entertainment industry in India lost roughly $2.6 Billion to piracy in the year 2022. In other regions like Europe and Eastern Asia, there are higher per-capita piracy rates. According to a pre-pandemic estimate by TechCrunch, Netflix could be losing $192 million in revenue monthly which is greater than Amazon at $45 million and Hulu at $40 million combined.

How to Plug Revenue Leakages

Piracy cannot be fully exterminated from the market. Criminals will find one way or another to deliver content regardless of the quality or malware. But it can be reduced to limit revenue leakages.

Reduce the Motivation to Pirate

The customer and the content remain the same, only the provider is different. A user will be incentivized to switch to illegal streaming platforms when the paid subscription models are not feasible in providing the right content for the right price. The biggest issue the public has had is with the constant rise in prices without an equal supply of movies and tv series.

Secondly, there is piracy of content and there is sharing a password with two of your friends. Companies employing password-crackdown measures would not bode well with users. There is revenue loss with this but the way to tackle it is to provide better content and through either restricting video playback or some other service usage rules. This method will limit a large chunk of users from pirating as most as casual viewers of pirated content.

Execute Digital Rights Management

Coming to the main culprits in piracy: the hardcore pirates. They are the ones who steal and supply the content. One way to tackle them is through Digital Rights Management (DRM). It is a common strategy employed by many content providers in which each video has a decryption code to view the file. This prevents any file sharing and restricts how pirates can gain access to content.

Watermark to Show Ownership

It can input a visible watermark on the photo or video content. This makes it clear who the owner of the content is, but it has be done so that it does not hamper the user’s experience. Then there are invisible watermarks which help regulate the distribution of pirated content. It can disincentivize violators as they will be aware it can be retraced to their location.

Conclusion: Limited Piracy and Increased Revenue

Piracy is never going to disappear! The rapid technological advancement has only made it easier for streaming services and content creators to lose out on revenue to digital piracy. What can be done is to make the experience for the user convenient and advantageous to go with legitimate businesses. Other steps can be taken to make it more complicated for pirates with legal action being another deterrent. The key component in this entire process is the customer. Keeping them on your side with quality content and great user interface at a reasonable price is the way forward.