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Are 4B illegal video downloads in 1H2014 that bad?

Unmonetized video demand

The buzz about online piracy of movies and TV shows has cooled somewhat over the past year or so. The general belief is that because peer-to-peer traffic is in decline illegal video downloads are falling too. Is that so? Not according to Tru Optik, the real-time and predictive audience intelligence company.

Tru Optik’s Digital Media Unmonetize Demand and Peer-To-Peer File Sharing Report for the first half of 2014 has some eye-popping numbers to contemplate. For example, the company claims that there were 2 billion TV show downloads and 2.2 billion movie downloads worldwide in the first half of 2014 from peer-to-peer sites. This the company claims represents over $12.5B in “unmonetized demand”.

Andre Swanston TruOptik

Andre Swanston, TruOptik

I spoke with Tru Optik’s CEO and Co-Founder Andre Swanston to get some context for these claims. I asked him how the company obtains the peer-to-peer (p2p) download data that forms the backbone of its analysis. He said that most other companies only connect to a small sample of p2p servers and check activity every 15 minutes. Tru Optik connects to 95% of p2p servers and monitors activity continuously. This gives them a very reliable mechanism to calculate which shows and movies are being downloaded and how often.

To understand how the company calculates unmonetized demand Mr. Swanston explained how Tru Optik came up with the $4 billion number for AMC’s Breaking Bad. Though there were many versions of Breaking Bad available on p2p sites in the first half of 2014, the one that was attracting most of the downloads was a special limited edition Blu-ray quality version including all the episodes. This version retails for between $300 and $500. Other shows topping the download list, such as The Walking Dead and Sherlock, were available on peer-to-peer sites in versions commonly sold in iTunes and other online stores for $2-$3. This explains why Breaking Bad, though it did not break the top 10 downloaded TV shows, had an unmonetized demand valuation of almost 10 times Sherlock, the fourth most downloaded show.

One important thing to bear in mind when reading the unmonetized demand data is that it does not equate to lost revenue. As Mr. Swanston said, people allocate their entertainment dollars to the most important content for them and may resort to p2p download for shows they are interested to see but would not purchase. Also, people with a legal license to the content may resort to illegal means to watch it. Robert Thompson, CEO of News Corp., said that 20% of Foxtel subscribers that had already paid for Game of Thrones still chose to pirate the show.

The question of whether piracy is increasing or not is still difficult to answer. Though Mr. Swanston does believe it is increasing he lacks the historical data to bolster the assertion (this is the first release of the unmonetized demand report.) Sandvine data is not much more help. In the Global Internet Phenomena Report the company says BitTorrent* aggregate share of overall Internet traffic in North America has decreased from 9% to 6% over the last year, but overall Internet traffic has increased over that period. So it is unclear if BitTorrent traffic has changed^.

To add even more confusion to the picture some content creators recognize they receive a benefit from illegal file sharing. Game of Thrones director David Petrarca said that shows like his thrive on “cultural buzz” and that piracy helps “oil those wheels.”

The Tru Optik’s report makes interesting reading and there is lots more data provided covering music, games and software in addition to TV and movies.

Why it matters

New data from Tru Optik claims over 4B movies and TV shows were illegally downloaded worldwide in the first half 2014. For comparison, Netflix streamed 4B hours in Q1 2013.

The company also says that Breaking Bad generated nearly $4B in unmonetized demand.

However, this revenue is not necessarily lost revenue to the industry.

*BitTorrent is the most popular peer-to-peer download protocol

^For example, if North American Internet traffic increased from 7 Exabytes a month in 2013 to 10.5 Exabytes in 2014 and p2p traffic declined from 9% to 6%, the amount of p2p traffic would remain unchanged at 0.6 Exabytes.

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